For individuals who want to avoid the public disclosure, administrative hassle and cost of probate, it can be important to understand what types of property are considered non-probate assets.
Perhaps the most common strategy for avoiding probate is a trust. Any assets titled in an irrevocable trust are no longer considered under the grantor’s control, and thus can offer a tax advantage. Yet assets in a revocable trust can also avoid probate. A revocable trust doesn’t offer the same tax advantages during a grantor’s life because he or she retains control over the trust principal. After the grantor’s passing, however, the trust becomes irrevocable and assets titled in the name of the trust will pass to beneficiaries without any involvement from the probate court.
Other types of assets also bypass probate. Assets with a payable-on-death designation, such as health savings accounts, also generally pass to the named beneficiaries without court involvement. Similarly, jointly owned assets will also pass to the surviving owner without having to go through probate. In both instances, however, probate may be required if no named beneficiaries or joint owners are still alive. For this reason, our law firm recommends that an individual plan for multiple contingencies in preparing a comprehensive estate plan.
Yet drawing up wills and/or trusts is about more than just anticipating how estate property might transfer under multiple scenarios. The true advantage of estate planning is that a well-designed plan can help individuals plan for every stage of life, from mid-life through retirement, including the possibility of mental incapacity. Check out our firm’s website to learn more.
Source: CNN Money, “Estate planning: Is a trust beneficial?”