When you die, your assets may go through a legal process called probate. The probate process can increase the amount of time it takes for your beneficiaries to receive their share of your estate and drive up estate administration costs.
You may be able to save your heirs time and money by taking steps to avoid probate.
A living trust is a legal arrangement that lets you transfer your assets into a trust while you are alive and still be able to benefit from and control them. When you die, a chosen trustee manages the distribution of the assets to your beneficiaries. Unlike wills, living trusts generally do not go through probate, which can save time and money.
Certain assets, such as life insurance policies, retirement accounts and payable-on-death bank accounts, can have designated beneficiaries. When you pass away, these assets pass to your named beneficiaries without going through probate. Births, deaths, marriages, divorces and other changes may affect who you want to pass your property on to. Be sure to keep your named beneficiaries up to date.
Joint ownership with rights of survivorship
Property, such as a home you share with your spouse, can automatically transfer to the co-owner if you both have title to the asset. This approach requires careful consideration because joint owners must work together and agree on decisions regarding the property.
Transfer-on-death deeds are another way to automatically pass your property on without going through probate. With a TOD deed, you can name beneficiaries who will inherit the property when you die. You must ensure that TOD deeds meet legal requirements for them to be valid.
Gifting your assets to your intended beneficiaries while you are alive avoids probate, but can have tax consequences. While Tennessee repealed the state gift tax in 2012, federal gift taxes may still apply. You may want to consult with a financial advisor before giving away any property.
Depending on your circumstances, you may not be able to completely avoid the probate process. However, with careful estate planning, you can minimize the potential costs and delays of probate.