Ways to Avoid Probate

Probate is the legal process of distributing a person’s assets after they pass, according to their will or state laws. Probate can be lengthy and expensive, so many individuals try to pass on as much of their assets outside of probate as possible. Here are three ways to help ensure your assets avoid probate:

Beneficiaries

The simplest way to help ensure your assets go to the intended recipients is by setting beneficiaries. Be aware that the beneficiary designations on accounts override the instructions in a will. If there is a discrepancy, the beneficiaries listed on the account will receive the assets and the assets will avoid probate. You can designate beneficiaries on various accounts such as retirement accounts (IRAs, Roth IRAs, 401(k)s, pensions, SEP and SIMPLE IRAs, etc.), life insurance policies, some annuities, and health and education savings accounts (529 plans and HSAs).

Transfer on Deaths

Another method is to designate your non-retirement accounts as TOD, or transfer on death. Similar to beneficiaries, your TOD designation overrides a will, so ensure any changes in your wishes are accurately reflected on all documents. In a joint account, the decedent’s portion would go through probate unless the account is set up as JTWROS (Joint Tenants with Rights of Survivorship) where the surviving account owner would receive the entire account.

Trusts

If beneficiaries, TOD designations, and survivorship rights aren’t sufficient, you might consider creating a trust. Trusts can be costly and complex to establish, but they provide significant control over how the assets are used and distributed. A trustee, who is legally obligated to act in the best interest of the beneficiaries, manages the trust. Trustees are usually close family members who distribute the assets to the beneficiaries according to the trust documents. Trusts can include withdrawal limits, age limits, and other conditions. For instance, you may require your child to graduate college before receiving the assets or limit their access to a certain amount of money per year until a certain age. Trusts can hold more than just money; you can place your house, collectibles, valuable personal property, etc., in a trust and those assets can avoid going through probate.

Consult a Financial Advisor

For personalized advice and to navigate the complexities of estate planning, talk with a financial advisor about the next steps in your estate planning journey.

Changes in laws may occur at any time and could have a substantial impact upon each person’s situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.