Receiving an inheritance can be a bittersweet experience, filled with a complex mix of emotions. Often accompanying this is the administrative burden of probate – the legal process that transfers the assets of a deceased person to their heirs.
While probate can ensure the orderly distribution of assets, it has some drawbacks. Understanding these and knowing about alternative transfer methods can make your inheritance journey smoother. Beyond probate is filled with issues that you can potentially avoid to protect your family.
The Downside of Probate
The first step in understanding why you might want to avoid probate is to recognize its potential pitfalls.
It Can Be Slow
Probate is notorious for its potential to be a slow process. It will take months or even years to complete. During this time, heirs may not have access to their inherited assets. This can be particularly frustrating if they need to pay for funeral expenses or manage other financial obligations.
It Can Be Costly
The cost of probate can also be quite steep. Court fees, attorney fees, executor fees, appraisal fees, and other expenses can add up quickly. These costs are paid from the estate itself, potentially reducing the amount of inheritance that you and other heirs receive.
Another less-discussed but significant aspect of probate is that it’s a public process. The estate’s value, the heirs’ identity, and other details become a part of the public record. If you value your privacy, this transparency might feel uncomfortable.
Bypassing Probate with Joint Ownership
One way to avoid probate is through joint ownership of property with rights of survivorship. When one joint owner dies, the surviving owner(s) automatically inherit the deceased owner’s share of the property. This transfer occurs without the need for probate. This method is commonly used for real estate, vehicles, and bank accounts.
Payable on Death and Transfer on Death Designations
Payable on Death (POD) and Transfer on Death (TOD) designations also allow assets to bypass probate. These designations can be applied to bank accounts, retirement accounts, and securities. Upon your death, the assets automatically transfer to the designated beneficiaries. Remember, it’s crucial to keep these designations up-to-date to align with your current wishes.
The Revocable Living Trust: A Comprehensive Solution
A revocable living trust is a comprehensive tool that is the right estate plan centerpiece for many people. Asset distribution to the beneficiary or beneficiaries after your death would not be subject to probate, so the drawbacks we looked at about would be avoided.
A living trust also offers flexibility and control. You can serve as the trustee and manage your assets during your lifetime, and you can change the terms of the trust or dissolve it at any time.
Schedule a Consultation Today!
Understanding what happens beyond probate can empower you to make informed decisions about estate planning. By exploring alternatives like the revocable living trust, you can discover ways to streamline the asset transfer process and protect your privacy.
Of course, there are many different tools in the estate planning toolkit. The ideal way to proceed will depend on the circumstances, but as a layperson, you are not going to understand the different approaches that can be taken.
This is where we can enter the picture to provide guidance. After we understand your situation and your objectives, we can provide recommendations. At the end of the process, you will emerge with a carefully constructed plan that is ideal for you and your family.
If you’re ready to get started, you can call us at 888-222-1328 to set up a consultation at our Phoenix, AZ estate planning office, and you can alternately send us a message through our contact page.