Very few people like to think about dying. However, if you have minor children and/or assets, you at least have to think about it long enough to make a will so your children and assets will go where you want them to go. Whenever it comes to your will, it will have to go through a process called "probate." Probate is the legal proceedings where your will is declared valid. However, probate can be a lengthy process - especially if the will is contested. The good news is there are ways you can help your loved ones avoid the process altogether. Here are three ways to do just that.
1. Payable-on-death bank accounts.
In most cases, if you are married, your bank accounts will immediately transfer directly to your living spouse - regardless of whether their name is on it. However, if you are unmarried and don't want to include any other loved one on your bank accounts, you can designate someone to receive the account funds after your death.
Most bank accounts provide the option for a payable-on-death designation. As a result of doing this, your bank accounts will not be included in your estate. Instead, it will go to the person you list on the form. All they have to do is bring in proper identification and a copy of your death certificate.
The best thing about a payable-on-death account is, unlike a joint bank account, your loved one doesn't have any access to the funds prior to your passing. So, only you and your bank will know how much money is in the account until you pass away.
2. Joint ownership.
When it comes to real estate, it can be a huge headache if it has to go through probate. The good news is that, much like with bank accounts, most states allow the real estate to pass directly on to the surviving spouse. Therefore, the real estate isn't included in the probate process since the spouse is still living.
But, when you aren't married, there are measures you can take to ensure your home passes right on to your loved one. One of the ways you can do that is to use some type of joint ownership for the property. There are three types of joint ownership:
- Tenancy by the entirety
- Joint tenancy with right of survivorship
- Tenancy in common
Tenancy in common will still go through probate, so you have to use one of the first two options if you want your loved ones to avoid that process with your home.
Tenancy by the entirety is what enables spouses to retain the property without going through probate. The reason it doesn't go through probate is because the title doesn't pass to the surviving spouse - they already owned it as part of the married unit.
Joint tenancy with right of survivorship can be granted to anyone you choose. For instance, if your lifelong friend has been living with you for several years and you want to make sure they own your home free and clear after you pass away, you would want to have them listed on the deed as a joint tenant with right of survivorship. Every party listed on the deed will have an undivided interest in the real estate and your share will pass to them after your death without going through probate.
However, if at any time one of the parties to this joint tenancy sells or transfers their share to another party, the deed automatically becomes a tenancy in common and will be subject to probate proceedings.
3. Revocable living trusts.
One of the easiest ways to make sure your loved ones get any money or assets without going through probate is to set up a revocable living trust. When you create this living trust, you will initially be the Trustmaker, the Trustee, and the Beneficiary. You will fund the trust with whatever assets you choose. These assets will no longer be part of your estate since you no longer own them in your own name.
After you pass away, your Successor Trustee will oversee the distribution of the Trust to your ultimate beneficiaries. Of course, any final debts of yours will likely need to be paid out of this Trust, so keep that in mind as you designate the funds for it.