When someone dies, their belongings typically pass through probate court. That process can take many months to complete and often diminishes how much their family members or other selected beneficiaries ultimately receive from their estate. Therefore, many people prefer to keep their most valuable assets out of probate court whenever possible.
Typically, everything owned directly by a decedent becomes part of their estate and is subject to probate oversight. However, there are a few ways that people can keep some of their resources out of probate court while ensuring that they go to an intended recipient.
Transfer-on-death designations
Most financial institutions will provide paperwork to account holders upon request allowing them to name a beneficiary who can assume ownership over the account at the time of their death. Someone who files a transfer-on-death designation with their investment firm or bank effectively streamlines the process of a specific beneficiary taking control of the bank account.
It won’t need to pass through probate court because the beneficiary can go directly to the financial institution after their death, present the appropriate evidence and become the new owner of the account. Transfer-on-death designations are useful and effective, but they do have their limitations. People will have to remember to update them at the same time that they update other estate planning paperwork if their intentions change before their death.
Funding a trust
Instead of arranging for an account to transfer at the time of someone’s death, it is also possible to move those financial resources into a trust while they are still alive. This approach cannot only keep the assets out of probate court and speed up the transfer to a selected beneficiary, but it can also help protect those resources from creditor claims as someone ages and after they die.
The scope of someone’s personal resources, their expectations for their golden years and the way they want to distribute their resources will all influence which approach(es) would be effective for them. Ultimately, making thoughtful plans to transfer personal property can increase the inheritance that beneficiaries receive and decrease how long they have to wait to receive their inheritance.