A primary reason people create estate plans is to ensure that their loved ones will be financially provided for. However, it’s not an instantaneous process where the lawyer reads the will and then cuts a check.
Instead, your estate will go through probate. It could be months before your heirs receive anything. Fortunately, there are ways to keep some or all of your assets out of probate, thus passing them directly to your heirs.
Other reasons to avoid probate
Probate is the process of validating a will, closing out the deceased’s financial accounts, paying off their debts, filing the final tax return and finally distributing the assets to the rightful heirs. In addition to being a time-consuming process that leaves the heirs waiting for their inheritance, there are other issues as well:
- High costs, including legal fees and probate tax, which is 10 cents per $100. For large estates, these added costs can dramatically reduce the estate’s value.
- The probate process is public, allowing anyone to access details about the deceased, their estate, its value and beneficiaries.
For these reasons, many people seek ways to bypass probate, such as:
1. Create a revocable trust
A revocable trust is one of the most effective ways to bypass probate. You, the grantor, transfer ownership of your assets into the trust. While you’re alive, you can serve as the trust’s trustee, thus allowing you to maintain complete control. A designated successor trustee will distribute the assets directly to your beneficiaries upon your death, according to the trust’s terms.
The assets held in the trust are not subject to probate. A revocable trust also provides you with the flexibility to alter or dissolve it at any time during your lifetime. Trusts are private documents, so the details of your estate won’t be public record.
2. Designate beneficiaries
You can name beneficiaries for certain assets, such as bank accounts, retirement plans and life insurance policies. Payable-on-death and transfer-on-death designations will enable them to access the funds soon after providing a copy of the death certificate. Assets with beneficiary designations don’t go through probate.
3. Joint ownership with rights of survivorship
Assets like real estate allow two or more people to own the property together, with the condition that when one owner passes away, their share automatically transfers to the surviving owner(s). The transfer is immediate without court involvement. This method is often used between spouses.
Everyone’s estate planning needs are unique. A legal professional can provide you with strategies tailored to your situation that allow your estate to bypass probate and comply with Virginia’s laws.