Most wills must go through probate, which is the process of proving them valid, paying creditors, and distributing assets to heirs. Some probate cases proceed smoothly and resolve in a short amount of time.
However, others can go on for months while the court tries to figure out the particulars. That is why many estate planners take steps to avoid probate, which can save you money and spare your family a long, drawn-out court battle. Here are a few strategies you can use.
Buy a life insurance policy
When a person purchases a life insurance policy, they complete beneficiary designations. These designations list a person’s name, who will receive the death benefit after you die. The death benefit passes directly to the beneficiary without going through probate. While helpful in avoiding probate, policyholders must update their designations when needed. Otherwise, your assets may go to a person you do not intend, such as a former spouse or a disinherited relative.
Include a transfer on death provision (TOD)
TODs allow you to name a person who will receive property or the proceeds of your financial account when you die. Upon receiving the death certificate, the financial institution will make changes to titles or account info to show the beneficiary as the new owner. The person has no right to the property or account while you are alive, which offers added peace of mind.
Establish joint ownership
Joint ownership works similarly to TODs, in that the property or asset passes directly to the heir upon a person’s death. However, the joint owner has rights to the asset while you are still alive, which can create complications in some cases. Accordingly, the joint ownership option is normally reserved for married couples.
You can also consider establishing a living trust, which is a tried and true method of avoiding probate. In this case, the assets within the trust pass to your heirs according to the guidelines you establish with your legal team.