When an individual dies, the terms of their will help dictate what happens to named personal belongings and assets. Probate is the process by which state law helps to manage, settle and distribute assets according to the terms laid out in a will. While probate is often a necessary and even helpful process, in some cases it can also be a lengthy one. There are, however, several ways an individual can pass along wealth and avoid the probate process.
When an individual establishes a retirement plan or sets up a life insurance policy they are required to designate both a primary and secondary beneficiary. Doing so allows the monies with which these accounts are funded and insured to pass directly to named beneficiaries and avoid going through probate.
Likewise individuals are able to quickly and easily transfer funds held in bank and investment accounts by filling out necessary paperwork. Referred to as a payable-on-death accounts, this process allows the individual named as the beneficiary to collect said funds when the account holder dies. In order to collect the funds, all the beneficiary needs is a copy of the death certificate along with proof of their identity.
Living trusts are another simple way to avoid the probate process. It’s important, however, that those assets an individual intends to transfer via a trust be titled as such. When the trust is set up properly, assets are transferred upon death to named parties.
While probate is a helpful process, there are times when it is in an individual’s best interest to avoid having assets go through the probate process. An estate planning professional can provide the necessary advice and guidance on how to maximize financial benefit while minimizing the burdens placed on loved ones.
Source: The State, “Managing assets in estate planning,” Neil Brown, Feb. 17, 2013