You may envision a scene that you have watched in a movie or on television. After someone passes away, an important figure calls certain people aside for a “reading of the will.” The implication is that the representative will read the will, and the heirs will receive their inheritances shortly after the meeting.
In reality, things do not work this way. A will must be admitted to probate. Probate is a legal process, and it takes place under the supervision of the court.
This process provides oversight, but there are some pitfalls. One of them is the time factor. The process can take close to a year in simple cases, and the heirs to the estate do not receive their inheritances until the court has closed the estate.
There are also a number of expenses that can pile up during the probate process.
Probate enters the picture when you pass away in sole possession of personally held property. There are various ways that property can be transferred outside of probate. Let’s look at a few of them.
Joint tenancy is co-ownership of property. To provide an example of how it works, you could add your daughter to the title of your home, and she would become a joint tenant.
She would own half of the property right away, while you are still alive. After you pass away, she would assume ownership of the entirety of the property, and the transfer would take place outside of probate.
This can sound like a great solution, but it is risky, because you are giving away half ownership of the home while you are still residing in it. If the joint tenant runs into financial or legal problems, half of the home could be targeted by claimants seeking satisfaction.
Plus, you could not sell the home without the approval of the joint tenant.
If there are insurance policies on your life, the proceeds would go directly to the beneficiaries after you die. The probate process would not be involved.
Payable on Death Accounts
It is possible to add a beneficiary to a bank or brokerage account. After you die, the beneficiary would assume ownership of the funds that remain in the account outside of probate.
This approach will facilitate probate avoidance, but it is an overly simplistic solution that is limited at best.
Revocable Living Trusts
A revocable living trust can be used to arrange for quick and efficient asset transfers outside of probate. As the person creating the trust, you can originally act as the beneficiary and the trustee. You name successors to take over these roles after you die.
The successor trustee can distribute assets to the successor beneficiaries after your passing, and probate would be avoided.
Learn More About Probate
To learn more about probate, download our in-depth report. The report is free, and you can get your copy through this link: Southampton PA Probate.