How to Reduce the Impact of Probate on Your Estate

July 11, 2016

 

You’ve worked your whole life to build your legacy. You established and grew a career, and perhaps even built your own business. You raised a family. You may have made your mark in your community. And you likely accumulated significant assets along the way.

 

Now it’s time to determine what will happen to those assets, and your legacy, after you pass away. It’s no small decision. Far too many retirees fail to make plans for their estate. The result is that their family and the courts have little guidance on how to distribute assets.

 

Without proper direction, family members may find themselves in conflict on how to split assets. Some charities and loved ones could be left out altogether. And, perhaps most concerning, your estate value could be significantly reduced by things like taxes and probate costs.

 

 

What is probate? It’s the process by which the court settles your estate. During probate, the court and your executor inventory your assets, pay all debts, liquidate any assets that need to be sold, file tax returns and locate all heirs. It’s a process that can be time-consuming and costly.

 

If you want to get your assets into the hands of your heirs as quickly as possible, and if you want to maximize the value of their inheritance, one strategy is to minimize the impact of probate. Fortunately, there are steps you can take to do just that. Below are three popular asset transfer methods that can help you manage your probate exposure:

 

Beneficiary Designation

 

Items that are transferred via a will are usually included in the probate process. However, assets transferred via beneficiary designation are not. That includes things like life insurance, annuities, IRAs, other qualified retirement plans and more.

 

If you have assets that don’t have a beneficiary option, you can put them into a trust to bypass probate. Trusts do have beneficiary designations. If you retitle those assets with trust ownership, the assets are then distributed via the terms of the trust, not by the will or the direction of the court.

 

There’s a wide range of different types of trusts. A financial professional or an estate planning attorney can help you choose the best type for your needs.

 

Joint Ownership

 

Another way to minimize the impact of probate is to use a joint ownership title on assets. This can be especially useful if you know that you want a specific asset to go to a certain individual.

 

For instance, you may have a lake house that you want to go to a certain child. You could add them as joint owner. Then, when you pass away, your joint owner child simply takes over as full owner, bypassing the probate process.

 

Be careful, though. As soon as you add an individual as joint owner, they assume all the same rights of ownership that you have. Make sure you can trust them with that responsibility before you choose this route.

 

Lifetime Giving

 

Finally, you could also minimize the impact of probate by giving assets away while you’re still alive. Clearly, if the assets aren’t in your estate at the time of your death, they won’t be included in the probate process.

 

The other benefit of giving during your lifetime is that you get to see how your heirs use the gifts. You may help a grandchild fund their education, a child start a business or maybe even a favored charity serve more people.

 

Lifetime giving can be complicated, though. You’ll likely want to maintain a level of fairness among heirs, so you may need a written gifting strategy setting firm limits and guidelines. You’ll also want to be sure to maintain enough assets to fund the remainder of your retirement, especially in case you need long-term care in the final years of your life.


Interested in reducing the impact of probate on your estate? Contact us at Bridgeriver Advisors in Bloomfield Hills, Michigan. We’re happy to consult with you and your family and help you develop an estate strategy that meets your objectives. Let’s connect today and start the conversation.

 

 

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

15846 – 2016/6/27

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