There are a lot of myths and misconceptions about estate planning. One misunderstanding is that having a will helps you avoid probate. However, the truth is, having a will does not mean you avoid probate. In fact, the assets in your will go through the probate process.
You may want to avoid putting your family through probate because it can be expensive, time-consuming and inconvenient. Here are a few methods for transferring your assets outside of probate:
Take advantage of beneficiary designations
Several different types of financial assets allow you to name a beneficiary who will receive the assets upon your death. 401(k)s, IRAs and payable-on-death bank accounts are some of the most common ones. Once you die, the person you name automatically collects whatever funds are in these accounts.
Utilize joint ownership
There are certain types of property that you can simply transfer ownership of upon your death. For example, you may be able to name your spouse as a joint tenant with a right of survivorship on your home. This is a great way to pass along property right away instead of putting your loved ones through a lengthy process.
Establish a revocable living trust
You can put some of your assets in a trust instead of your will. If you do this, you must name a trustee to hold the property for your benefit until your death. You can spell out specific instructions for transferring the property to your heirs when you die.
One of the easiest ways to skirt around the probate process is giving away assets before your death. However, do not give away assets without considering the financial implications. You may be subject to gift taxes. Generally, you should only give gifts that fall below the tax threshold.
Avoiding probate is not a necessity, but it can help your beneficiaries receive their inheritance faster and cheaper.