One key decision to make when creating your estate plan is whether or not you want your estate to pass through probate.
You might want it to reassure the beneficiaries that a court is overseeing things. Or, you may not have that many assets to worry about and value the low cost and relative simplicity of only making a will and keeping everything in one place rather than other estate planning tools.
Probate has some significant disadvantages
The main reasons people want to skip probate are:
- To get your assets into people’s hands quicker
- To keep the estate’s contents private
- To reduce the chance of challenges
- To protect the contents from creditors
So, if you prefer to avoid probate, what should you do?
- Use beneficiary designations: The instructions you give here supersede anything you write in your will. So, if you designate your spouse as a beneficiary of your retirement plan, the fund manager should pay directly to them as soon as you die. The problem comes if you forget to update things, and she is now your ex-wife. Unless you change the designation, she will still get those funds.
- Use trusts: Irrevocable trusts are unchangeable from the moment you create them. Revocable ones let you make changes during your lifetime, then become irrevocable on your death. The trustee will distribute or manage the contents as you instruct.
- Share ownership: Take a house, for instance. If registered in your and your spouse’s names, your part automatically passes to them when you die.
The other option is, of course, to own nothing when you die, having transferred ownership of everything while alive. There are lots of factors to weigh up when estate planning. Having help to understand them will be crucial to making a wise choice with or without probate.