07/20/2018










5 Simple Ways to Avoid Probate

Probate fees can be excessive depending on the state in which you live. States may require that individuals pay 5-15% of their total estate for probate fees. Because of the high costs that can be attached to fees, it is to your advantage to avoid probate.

1. Create a revocable trust.

A revocable trust is an instrument that you can use to directly bypass the probate procedure. In some states, you may even be able to serve as the grantor and trustee of the trust. This means that you would be able to determine how to distribute your assets and also administer the trust throughout your lifetime. With a revocable trust, you can also elect to make discretionary distributions of income to beneficiaries throughout your lifetime. An estate planning lawyer can help you in the process of distributing assets so that you minimize tax implications for your estate.

2. Create gifts of your assets throughout your life.

Creating a gift of your assets is also another easy way to forego the probate process. If you decide to make a gift to charity, then this could be one way that you minimize taxes for your estate. A charitable gift deduction enables you to write-off the gifts that you make to charities. You may also choose to make a gift to a beneficiary through a retirement plan or IRA. This will also enable you to transfer gifts to beneficiaries without the hassle of probate.

3. Title your assets in a wise manner to avoid probate.

You may want to be conscious of certain protections that may exist in your state. For example, Florida has a homestead exemption that enables a spouse to claim a life estate in a home that was used as a primary residence of the spouses throughout their lives. Otherwise, spouses may hold property under a tenancy by the entirety arrangement. This type of arrangement also ensures that a spouse has a full right of survivorship in a piece of property upon the other spouse’s death.

4. Ensure that you have designated beneficiaries for life insurance policies.

Some individuals make the mistake of failing or forgetting to name beneficiaries on a life insurance policy. If you forget to name a beneficiary on a life insurance policy, then creditors may be able to attach the proceeds of the plan. Ensuring that there is a named beneficiary on your plan will help keep proceeds within the estate.

5. Prepare the division of your assets ahead of time.

Taking some time to seriously consider the distribution of your assets ahead of time pays off in the long run. By preparing a trust or pour-over will document, you can avoid probate and maximize the value of your estate.

Sources:
http://money.msn.com/retirement-plan/how-to-die-the-right-way-kiplingers-personal-finance-magazine?page=2
http://www.fool.com/personal-finance/taxes/the-truth-about-living-trusts.aspx



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