Let’s face it: none of us enjoy thinking about what happens to our estate after our passing. Though death is ultimately unavoidable, it’s also the topic we universally prefer to ignore.
But it’s also a fact that doing some pre-planning in advance of this unpleasant certainty can provide significant comfort and decreased stress for family members and other loved ones as they navigate the difficult passage of bereavement. In other words, arranging your affairs to make things as uncomplicated as possible for those left behind is one of the most considerate, loving things you can do—even if not the most enjoyable.
The probate process—the procedures established by your state to dispose of your property and obligations upon death—can be one of the most emotionally trying and financially inconvenient aspects of losing a loved one. So, it just makes sense that you should do whatever you can to reduce or eliminate the time required for your estate to go through probate. Here are three important strategies that can save your family both time and money.
1. Consider a revocable trust. A revocable trust is a legal arrangement whereby property can be transferred from an individual owner to the trust. The person who creates the trust and transfers property into it is the grantor, and the grantor can also be named as the trustee (the person responsible for administering the trust). As the name implies, a revocable trust can be changed or even terminated at any time during the life of the trustee. The grantor names a beneficiary of the trust: an individual or entity that will receive the assets in the trust upon the death of the grantor. In this way, the assets of the trust become available to the beneficiary without the necessity of going through the probate process. Typically, a revocable trust must be written by a qualified estate planning professional, but this expense should be considered in light of the potentially large savings in time and reduction of stress for the bereaved person who is dependent upon ease of access to the assets in the trust.
2. Establish joint ownership. Funds held in banking and investment accounts, real property, and other types of assets can be held in joint ownership, sometimes called “joint tenancy.” This is especially useful for spouses, since the surviving spouse retains ownership of the assets in such accounts in the event of bereavement. Because ownership of the assets is retained by the survivor, they are not subject to probate, and the surviving spouse is able to continue using the assets without interruption.
3. Name and update beneficiaries. Most of us are familiar with the concept of a beneficiary for a life insurance policy: this is the person who receives the death benefit when the policy owner dies. But other financial instruments also utilize beneficiaries: IRAs, 401Ks, annuities, and other similar accounts and contracts typically require the designation of a beneficiary to receive proceeds in the event of the owner’s death. When a beneficiary designation exists, the assets in the related account pass to the beneficiary without going through probate. It is very important, however, to regularly check the beneficiary designations on all such accounts and contracts, because whatever the beneficiary designation is determines who will receive the assets. If there has been a divorce, a death, a change in a business relationship, or other major event, the beneficiary designation should be verified to be certain it is still what the account owner intends. For example, even if an ex-spouse has been “written out of the will,” they will receive the assets of any account—perhaps a long-forgotten IRA—in which they appear as the beneficiary.
