For those who have specific goals for their assets once they leave this world, an estate plan becomes an essential component of their financial plan. There are many benefits to having an estate plan, including ensuring that your wishes will be carried out and making the process of administering your estate much less of a burden on your heirs. One of the more important – and frequently misunderstood – benefits of estate planning is the ability to avoid probate. Probate is the legal process of distributing your estate after you die, and it can be both expensive and time-consuming. The fees from probate are deducted from the estate, leaving less for your heirs than you otherwise intended. Furthermore, since probate is conducted through the courts, administering your estate can be a lengthy process and, depending on the complexity of your estate, could take years to be finalized.
The Des Moines Register reminds us in “Unpacking the Perils of Probate” that if your estate is subject to probate, then it will become public record. If you want privacy – even after you pass away – and want knowledge of the contents of your estate to stay with your heirs, then make plans in advance for your assets to avoid probate.
With headlines of celebrity estates and the errors of the rich and famous, some people maintain that a will is all they need for their assets to be administered outside of probate. This is not true. A will “tells” a probate judge how you want your assets distributed through probate. To prevent your assets from going through the probate process, there are several steps you can take. Talk to a qualified estate planning attorney about them.
Designate Beneficiaries: Remember that life insurance policies and retirement accounts have beneficiary designations that direct who receives these benefits when you die. The will can’t touch them. The article explains that assets covered by a beneficiary designation don’t pass through probate. The designated beneficiary typically trumps what’s in your will. You should make sure you review these designations regularly. If there’s no beneficiary designated, that account may be subject to probate.
Set up a Trust: If you have quite a few assets that aren’t covered by beneficiary designations, you can create a living trust to avoid probate. A trust can allow for more control when your assets are distributed after you pass. This is a very good benefit for those with minor children, if you don’t want them to receive their inheritance in one lump sum. Trusts are more expensive to set up than just a will, so talk with an estate planning attorney to see if one makes sense for you.
No one wants to burden loved ones after we die. To be sure your estate plan is ready to save them money as well as migraines, work with an estate planning attorney to avoid probate.
Reference: The Des Moines Register (August 3, 2015) “Unpacking the Perils of Probate”