To spare your family’s time, cost, and stress associated with probate, our last article in part one of this series, “Probate: What It Is & How To Avoid It”, we explained how the probate process works and what it would entail for your loved ones. Here in part two, we’ll discuss the major drawbacks of probate for your family, and further outline the different ways you can help them avoid probate with wise planning.
Not everyone realizes that for a Trust to function properly, and do what it is supposed to, it’s not enough to simply prepare a Trust and then list the assets you want the Trust to include. When you create your Trust, you must also transfer the legal title of any assets you want to be held by your Trust from your individual name into the name of your Trust. Retitling assets in this way is known as “funding” a Trust.
While many lawyers will create a Trust for you, few will ensure your assets are properly inventoried and funded into your Trust. If any assets are not properly funded to the Trust, you’ve merely established an empty shell of a legal planning tool, the Trust won’t work, and your family will have to go to court in order to take ownership of that property, even if you have a Trust. Not funding your Trust would defeat a major purposes of Trust planning – to avoid the courts.
Although a living Trust can be an ideal way to pass your belongings to your loved ones, each family’s circumstances are different. This is why we will not create any documents until we know what you actually need and want, so the best planning decisions can be made for you and your family—for now and for the future—based on your family dynamics, assets, and desires.
While living Trusts are beneficial for most people and are designed specifically to avoid probate, there are instances when beneficiary designations are used. The following are some of the most common assets that use beneficiary designations and can also bypass probate:
Retirement accounts, IRAs, 401(k)s, and pensions
Life insurance or annuity proceeds
Payable-on-death (POD) bank accounts
Transfer-on-death (TOD) property, such as bonds, stocks, vehicles, and real estate
Other assets that do not go through probate include assets with a right of survivorship, such as property held jointly either as husband and wife, or jointly with someone else. Probate would also be unnecessary, and assets would automatically pass, as long as there was a surviving co-owner.
The best way for you to determine which estate planning strategies are best suited for your situation is to meet with us, by scheduling your Family Estate Planning Session. Call 718.514.7575 during this process, we’ll take you through an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you’re gone or if you become incapacitated.