Many of us have experienced the devastating grief of losing a partner or parent. This grief can be amplified when we need to deal with the settlement of an estate.
This may have been easier for the surviving spouse, if all assets were held jointly. But if you have had to settle a parent's estate, you may have faced the time, expense and stress of probate, which is the legal process of settling an estate.
To make sure it's easier for your heirs, consider using some tools that help them legally avoid probate, but still receive their inheritance. Here are three good options:
1. Make a will – and keep it up to date
A will contains the deceased person's wishes, including how assets will be distributed, who will be the beneficiaries, who will be responsible for the sale and distribution of the assets (executor) and burial directions.
Jennifer B. says: “Without a will, the state writes a will for you, determining who will inherit from you and what your shares will be, and whether or not you want it,” said Cona, founder and managing partner of Cona Elder Law in 2015. Melville, New York.
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For these reasons, a will is a minimum component of your estate plan. Solicitors can help you write your will; There are also free and low-cost online platforms where you can create one yourself.
Your will should contain a list of all your assets and property, the names of your beneficiaries, and how the assets will be divided among them. You must also name an executor to carry out the wishes in your will and you must choose guardians for your minor children and pets. It is important to keep it updated.
“Relationships change, laws change, and your origins change,” Cunha says. “Many people sign their wills and forget about them. We recommend reviewing your estate plan every two to three years to ensure that the people you have named as beneficiaries and fiduciaries (the executor and others managing the assets) are still the people you want in those roles.
“You should review your plan immediately if there is a death in the family, marriage, birth, significant changes to your assets, or changes in tax laws.”
See also: Don't leave an ignorant trustee in your estate plan
2. Designate beneficiaries for all accounts
Be sure to name and record beneficiaries for all of your savings, investment, and retirement accounts as well as individual investments such as certificates of deposit (CDs), savings bonds, and life insurance.
I have a personal example of why this is important. My mother passed away earlier this year and she did an excellent job making it easy for me to inherit her estate without going through the probate process. But she forgot to add me to one bank account as a beneficiary or joint owner.
In order to get that money, I had to work with an attorney to file an unadministered distribution. It is a Florida option that allows the person who paid the deceased person's funeral or final medical bills to compensate them using estate assets. This required me to collect payment receipts as well as a lot of other paperwork, and I had to pay the attorney and filing fees.
Bottom line: The time and stress involved in accessing this account could have easily been avoided. Make sure there is a beneficiary for each asset you own that may pass to your heirs.
Tip: If you have accounts at banks or credit unions (such as checking accounts, savings accounts, and CDs), you can create a payable-on-death (POD) designation for each account so that one or more beneficiaries can receive the proceeds without going through probate.
Finally, if you have joint accounts and property with your partner, you will be able to avoid probate, since you are essentially bypassing the estate process. However, if you are a surviving spouse and are considering making your children joint owners rather than beneficiaries, proceed with caution.
My mother has made me a joint owner of all her accounts and assets (except the one mentioned above), but I am the exception, not the rule. We were very close, as an only child I was the sole beneficiary and she was divorced and never married again. However, few properties are this simple, so shared ownership is not recommended in most cases.
See also: How to give your heirs quick access to your bank accounts upon your death
“Adding a joint owner to an account is ripe for abuse and unintended tax consequences because adding ownership can amount to a gift,” says Ido Walny, founder and managing partner of Walny Legal Group in Milwaukee, Wisconsin. This is not the worst that could happen.
“Several years ago, we received a call from a woman who had been credited with her mother's large checking account with her brother,” recalls Walney, a board member of the National Association of Real Estate Planners and Boards. “When her mother died, her brother settled the score. This was not what the mother intended, but rather what she enabled her son to do.
“Litigation would have been the only option to recover the money, but the sister did not want to sue her brother,” he explains. “This is a bad outcome for everyone involved, except for the brother. Beneficiary designations are a much better method to use.
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3. Use probate avoidance tools and shortcuts
A number of estate planning tools can help you avoid probate altogether or at least shorten the process significantly. They vary by state and work better in some circumstances. some examples:
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Check to see if your estate qualifies as a “small estate” inheritance. Each state allows heirs of “small estates” to avoid the probate process. Small properties can be priced as low as $50,000 or as high as $500,000. To receive the assets, your heir(s) will need to fill out a form (often called an affidavit), notarize it, and then submit it, along with the death certificate, to a bank or institution that holds the assets.
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Consider “transfer on death” bonds if you own real estate and your estate will not qualify for the “small estate” exemption.. More than half of US states allow this, and five states (Florida, Texas, Michigan, Vermont and West Virginia) allow a similar option – Lady Bird Bonds. This feature allows you to name a beneficiary of your home, but allows you to live in the property while you are alive. When you die, the property is transferred intestate.
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Create a living trust if your state does not offer transfer options upon death, or your estate is too complex for you. This may be your best option if you are divorced or remarried, have stepchildren or children from a previous marriage, have strained family relationships or separated family members, own property in multiple states, own a business or have significant assets and want In reducing your estate taxes.
“A living trust is our preferred method of ensuring that property passes to beneficiaries intestate,” Walney says. A living trust can also include other assets that can be transferred without a will, particularly savings accounts and other investments, he says.
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Proceed with caution when creating a living trust. “Certain assets, such as retirement accounts and life insurance policies, should not be included in living trusts because they can trigger tax consequences,” Walney says.
Margie Zabel Fisher is a freelance writer and founder of The 50-Year-Old Mermaid, where she and other 50+ women share their learnings and experiences living their best lives after 50. Her website is margiezfisher.com.
This article is reprinted with permission from NextAvenue.org©2024 Twin Cities Public Television, Inc. all rights are save.
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