Probate is the process that occurs after someone passes away, where their will (if available) is validated, debts are paid and assets are distributed according to the instructions in the will or, if there’s no will, according to state law.
Many people prefer to avoid probate due to its time-consuming nature and potential costs. If you are trying to make your estate planning as solid as it can be, know that avoiding the probate process can be a strategic decision to streamline asset transfer and minimize delays and expenses for your beneficiaries. Consider the following tips to help you avoid probate and better ensure a smooth transfer of assets.
Tenancy agreements
One of the most effective ways of avoiding probate is by utilizing tenancy agreements such as joint tenancy with right of survivorship or tenancy by the entirety. In these arrangements, when one owner passes away, the ownership automatically transfers to the surviving owner(s) without the need for probate. This is commonly used for real estate properties but can also apply to other assets like bank accounts and vehicles.
No-contest clause
A no-contest clause is another tool to consider when structuring your estate plan to avoid probate. This clause, also known as an in terrorem clause, essentially disinherits any beneficiary who challenges the validity of the will. By including this provision, you discourage disgruntled beneficiaries from contesting the will in court, thus potentially avoiding lengthy probate proceedings.
Lifetime gifting
You can also avoid probate by engaging in lifetime gifting. Instead of waiting until after your passing to transfer assets to your beneficiaries, you can gift assets during your lifetime. By doing so, you reduce the size of your estate, potentially lowering the amount subject to probate. Lifetime gifting can include giving cash, property or other assets to your loved ones.
While avoiding probate helps lessen the administrative burden on your estate and beneficiaries, it’s essential to approach these strategies carefully and consider their implications. Consider seeking legal guidance to help ensure that your estate plan is properly structured to achieve your goals and minimize the risk of any potential pitfalls.