In a previous article, I explained the probate process and why you might want to avoid it. Generally, probate involves a court process meant to distribute your assets to your loved ones as well as to creditors. It can be stressful, time-consuming, very public, and expensive. In this article, I will discuss ways to avoid probate.
1. A Revocable Living Trust
A trust can be a great mechanism to avoid probate and is the recommended method. While there are some upfront fees for creating a trust, the fees are typically much less than probate costs. Generally, you, as trustee, retain control of the assets held within the trust during your lifetime. If you become incapacitated, a trust will allow you to avoid a potentially costly and public conservatorship proceeding where a judge will appoint someone to handle your affairs. Besides the cost-savings and privacy afforded to you if you become incapacitated, a trust helps to prevent any possible "dirty laundry" from being aired upon your death. This is because a trust allows you to avoid the public probate process. Thus, a trust does not become public record when you die.
2. Joint Ownership
Joint ownership of property with the right of survivorship allows the asset to avoid probate. Property held jointly with a right of survivorship will pass to the living owner upon the death of the other owner. The probate-avoidance benefit of joint ownership with right of survivorship can be defeated, however, when both joint owners die simultaneously. For this reason, a trust is the recommended method of avoiding probate.
3. Beneficiary Designations
Certain types of accounts with beneficiary or pay-on-death designations allow the assets held within those accounts to avoid probate. Common examples include life insurance, retirement accounts, and bank accounts. It is important to keep these designations up-to-date or the probate-avoidance benefit of these types of accounts can be lost.
Gifting property during your lifetime allows those assets to avoid probate. If you don't own the property upon your death, then it will not be included in your probate estate. However, your estate might be liable for gift tax. Additionally, the property might lose a step-up in basis, which could result in an increase in capital gains tax.
Contact Us — An Experienced Honolulu Estate Planning Law Firm
The key to avoiding probate is to ensure that your assets do not qualify as probate property. The aforementioned four ways to avoid probate will help you do just that. Contact us today so we can help you create a trust and fine-tune your estate plan.
This article is a service of the Law Office of Keoni Souza, LLC, an estate planning law firm in Honolulu, Hawaii. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by contacting our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.
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