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Friday, September 2, 2011

Three Simple Steps to Avoid Probate

Tricks of the Trade: Three Simple Steps to Avoid Probate
by Richard F. O'Boyle, Jr., LUTCF, MBA

Much is said about the value of avoiding probate, the legal process where your will (if you have one) is validated and its provisions carried out. Complicated estates can be tied up for years with legal maneuvering and family wrangling. Most cases are straight-forward and uncomplicated – but they can still be time-consuming and emotionally draining.

First, you can free up some resources for your heirs by carefully naming them as beneficiaries on savings and checking accounts, adding them to the title of a car or boat, or including them on the deed of a piece of real estate. Designating some assets as “payable on death,” “transfer on death” or “in trust for” can accelerate the transfer of these assets to your intended beneficiaries. They just need to show copies of their identification and your death certificate to the bank or motor vehicles department.

If you are concerned that your heirs will have trouble paying taxes or expenses immediately after your death, carefully take stock of your smaller assets. This is particularly helpful for people who do not have a will or are not legally married to their spouses. You can free up these resources for them while the estate works itself through the probate process.

Second, most of your big assets such as your house, life insurance, pension, retirement plan or investment account should already have named beneficiaries or joint owners, which means they pass to the intended person (or trust) immediately upon death and avoid probate. Make copies of the signed and dated beneficiary designation forms and keep them in a safe place with your other financial records. Banks and insurance companies are not infallible – they lose these documents all the time! Make sure that you name contingent beneficiaries and tertiary beneficiaries. The last thing you want is for these important assets to wind up in your estate. They will be subject to death taxes, the vagaries of the probate process and (in the case of IRAs) immediate taxation.

Finally – but most importantly – make sure that you have a will. While this doesn’t “avoid” probate, it simplifies the process dramatically. If you have minor children, an unmarried spouse or even remotely complicated family affairs, at a minimum you should have a simple will. Attorneys can prepare a simple will for a few hundred dollars or you can use a software product or online service for a fraction of that cost. If you don’t already have a will, or it hasn’t been updated since you have had major changes in your life, make it a point to get one signed before the end of the year.

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