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How can an estate plan help your loved ones bypass probate?

On Behalf of | Sep 28, 2022 | Estate Planning

Probate court exists in part to help ensure the fair and appropriate distribution of people’s property when they die. Left to their own devices, some people will lie to their family members or even steal from an estate.

The probate courts help provide oversight for the distribution of someone’s assets when they die and also help provide a form of protection for creditors owed money by the deceased. Assets that pass through probate court as part of someone’s estate are potentially subject to creditor claims and Medicaid estate recovery efforts. If the estate is particularly large, there may also be estate taxes that apply based on the total value of the estate.

Keeping certain property out of probate court can diminish the total value of the estate and protect those assets from creditors. What are three ways to keep assets out of the probate courts?

Move them into a trust

The solution that applies to the broadest range of assets is the use of a trust. When you change the ownership of real property or financial accounts, you can prevent the inclusion of those assets in your estate. It is common for people creating estate trusts to move their biggest and most valuable property into the trust.

Making gifts to loved ones

You can transfer property to the people you want to receive those assets a little at a time throughout your golden years. Making annual gifts of individual assets or financial resources will support your loved ones and allow you to witness them enjoying their inheritance. With careful planning, you can give thousands of dollars to each of your loved ones every year without incurring any taxes.

Arranging for assets to transfer when you die

You can execute a deed that makes someone the new owner of your real property after you’re passing by giving them rights of survivorship. You can also potentially transfer financial accounts by adding a transfer on death designation. Such accounts can then quickly and easily transfer to the ownership of an account to your chosen beneficiary without first needing to pass through probate court.

The less property you have to subject to probate oversight, the less possibility there is of creditor claims and other issues diminishing or altering your legacy. Engaging in careful estate planning can help you maximize the impact of the inheritance that your loved ones receive when you die.