Probate: the process of identifying the rightful heirs, and transferring the decedent’s property to them in a way that also protects creditor’s rights, involving the court system (not a legal definition).
Court involvement is needed whether there is a will or not, if a person died owning real estate and/or assets valued at more than $25,000. Many people attempt to structure their affairs so that they can avoid probate, despite the fact that they have assets. There is a right way and a wrong way to do this. If you have not visited with an estate planning profession, you may be using the wrong methods.
Tip 1: If you own an account in joint tenancy with another person, that person gets the money when you die, without having to go through probate. If this is your spouse, fine. If it is not, be wary. The money becomes the asset of the other person at the time that you add his or her name. The money becomes vulnerable to that person’s creditors, divorce settlement, etc.
Tip 2: If you put your child’s name on your house, as a joint tenant, you may be creating a tax issue (in addition to the same financial risks listed in Tip 1). Yes, when you die, your child gets the house without going through probate. But you have cut off some tax advantages that your child would have if s/he waited to inherit the house when you died; and the tax savings could be significant.
Tip 3: Use a revocable trust to avoid probate. You maintain control. Your assets are protected from some creditors. You can change it anytime you want. It takes the place of a will, where you still get to say who gets your assets when you die. Your children get the tax benefits associated with waiting until you are gone to get their inheritance.
An estate planning attorney can advise you on how to structure your trust. At your death, your spouse still gets everything, if that is what you want. If you have minor children, your trust can contain another trust to care for their money. And, your attorney can assist your trustee in distributing assets and take care of the other small number of legal requirements that accompany dissolving a trust, at a substantial savings over the cost of probate. Contact an estate planning attorney soon.
The nation’s eyes and ears will be on Iowa on caucus night, February 1, 2016. Traditionally, only about 20% of registered voters turn out for caucus night. Let’s put our town on the map, for a robust turnout, shall we?!