Estate Planning is crucial to ensure that your assets are passed along according to your wishes. In some states, it is desirable to pass assets outside of probate. You can accomplish this is through a trust or other titling substitutes.
Probate is the judicial process where a will is proved in court as a valid public document. This involves evaluating assets, hiring an attorney, filing papers with the court, creating an inventory of assets, and waiting a required amount of time to see if anyone comes forward to make claims. This process can last several months and up to a few years. For this reason, some people wish to avoid probate.
A will substitute is a technique that allows you to transfer property at your death outside the probate process. While will substitutes avoid probate, the assets may still be taxable under estate tax. A common misconception is that if you have a will, your assets do not need to go through probate. Contrary to this belief, those assets still need to pass through probate court before distribution. This is where a trust comes into play. Read more about revocable trusts here: https://www.assetprotectionattorneys.com/Asset_Protection_Blog/2017/June/Using_Revocable_Living_Trusts_in_Estate_Planning.aspx
Additionally, certain bank accounts and brokerage accounts can be used as will substitutes. The first is Right of Survivorship. There are two types: Joint Tenancy or Tenancy by the Entirety. Joint Tenancy with Rights of Survivorship is a type of account that is owned by at least two people. Each of the owners has an equal right to the account’s assets. While this account works well as a will substitute, there’s a potential danger to Asset Protection. If one of the owners has a creditor, the creditor can seize the entire account.
In Tenancy by the Entirety (TBE) with Rights of Survivorship, assets are owned by a married couple. Only some states have TBE so make sure to double check the statues of your state of residence. If a creditor gets a judgement against an individual spouse, the creditor cannot take the property because the assets are owned by TBE. Therefore, this option is more protective than Joint Tenancy.
A Payable-On-Death (POD) account is a bank account in which the beneficiary receives the assets almost immediately following your death, hence its name. To access the funds, all the beneficiary needs to do is present your death certificate. You have complete control over this account while you are alive. So long as you are competent, you can change the beneficiary. The beneficiary has no entitlement to the account until your passing.
A twin provision of this account is a Transfer-On-Death (TOD) account. This works similarly to a POD account. The difference is that POD is a bank account while TOD is a brokerage account.
If you wish to pass assets to your children, you can create UTMA accounts. Uniform Transfers to Minors Accounts (UTMA) are owned by the social security of the children. The accounts will not need to pass through probate because you are not the owner of the accounts.
If you are looking to avoid probate, a will substitute can be an effective Estate Planning tool. You can save your loved ones time, money, and stress during an otherwise difficult time.
For more information on Estate Planning and Asset Protection, contact The Presser Law Firm, P.A. for a complimentary preliminary consultation.
The Presser Law Firm, P.A.
(561) 953-1050 or e-mailInfo@AssetProtectionAttorneys.com