Monday, September 12, 2011
When it comes to estate planning, one of the many questions is whether or not probate is an ideal option. Most of the time, it is better for your beneficiaries to avoid probate. Why would you want to avoid probate? Through the probate process you have no immediate access to cash in order to pay bills, debts, or taxes - you would be left paying for it all out of pocket. Also, a probate judge could get in the way and slow down the process which is already pretty lengthy, as well as the fees that are accrued and that probate is public record. In many cases, it is best to use every avenue available to avoid the probate process.
There are three main actions which can help avoid probate. These are: Jointly Titled Assets, Payable on Death or Transfer on Death Accounts, and a Revocable Living Trust. They all have their positive and negative aspects. This article is to briefly touch on each action and the different consequences of each.
Jointly titled assets consist of bank accounts, real estate, automobiles, and the like in which the main owner shares ownership with at least one other person. When the main owner dies, ownership is then transferred to the other owner(s) listed on the contract or agreement. Problems arise when it involves financial accounts.
If the other owners do not contribute to the account, the original owner may be deemed as having made a gift, causing the funds to be subject to fees and taxes. Also, if one of the owners is sued the funds may end up with a judgement lien on them and, depending on the outcome, may result in most or all of the funds being depleted. Another problems arises if the owner has three children, but only lists one child as the joint owner. This automatically causes the other two children to be disinherited from the account. Another issue arises when one of the beneficiaries is a minor. A conservatorship is put in place in order for the account to be used for the minors benefit.
A Payable on Death Account, also referred to as Transfer on Death Account, allows you to designate a beneficiary of your bank accounts, investment accounts, and individual stock certificates for after you die. This can be a quick and easy way to disburse your funds to your beneficiary, but still holds its own possible problems.
Payable on Death Accounts can cause disinheriting of beneficiaries in the same way as a jointly titled asset can. Another issue arises if one of the beneficiaries dies before the owner does. This can make it difficult to figure the amount the other listed beneficiaries receive. If the deceased beneficiary was the only one listed, the owner needs to list a new beneficiary in order to keep the account from becoming part of their estate and being subject to probate. If the owner of the P.O.D account wants to make changes or transfer funds, some institutions will require the consent of the beneficiaries. Another requirement that may be mandated by the institution is that all beneficiaries receive equal shares.
Revocable Living Trusts are agreements involving the Trustmaker/Grantor/Settler, the Trustee, and the Beneficiary. The trustmaker is the owner who wants to set up and fund the trust, the trustee is the person who manages the trust, and the beneficiary is the person who benefits from it. Usually, all three are one and the same. Once the trust is made the trustmaker will fund it with all assets and make the beneficiary of all retirement accounts, life insurance, and annuities. The trustee manages, invests, and spends the funds of the trust for the benefit of the beneficiary. The way this avoids probate is that once the trust is made, the trustmaker will not own any property in his/her own name. After the trustmaker passes, the trust will continue and the Successor Trustee named will have authority of the trust and its disbursement.
Whether you use one or all of the options listed above, you can easily avoid having your estate subject to probate. This will significantly cut down on the amount of time your heirs and beneficiaries have to wait for what you want them to have; in most cases they can receive it almost immediately! Hopefully, I have helped enlighten you with alternatives and options outside of the typical process.
Article Source: http://EzineArticles.com/6411070
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