Probate is not a word that many people are very fond of for many reasons. It is a complicated legal process, which in itself can cause anxiety. Amongst other factors are the time it takes to complete, the expense incurred by the estate before taxes or debts are even paid and the public nature of the process.
It is not necessary for everyone to avoid probate in Pennsylvania, but it can be very beneficial for some people. How do you avoid probate?
You have four basic tools for sheltering your assets from probate:
- Gift: You can give your property away. There is nothing to probate if you do not have an estate. The downside is this would not leave you with much to live on prior to death, and last-minute gifts can have their own consequences.
- Joint ownership: You can structure ownership in a property in such a way to avoid probate, including real estate or bank accounts. You can do so by creating a joint-ownership with the rights of survivorship or tenancy in the entirety. This is a formal way of saying that the terms must make it clear your ownership passes to the remaining owner upon death not your estate.
- Beneficiary designation: Life insurance policies, retirement accounts and other payable-on-death accounts avoid probate. You can designate a beneficiary of your choosing to receive the payout. You must keep these designations up-to-date to avoid unnecessary consequences.
- Revocable living trust: A trust allows you to give your property away while retaining control over it and the ability to use it for your benefit during life. You can structure a trust in many ways, but it must be established properly and the property must be transferred into it prior to your death.
Like any project, it takes the right combination of tools to do the job right, which is why you should get advice to help you develop the best strategy based on your individual financial circumstances.
Source: About.com, “4 Ways to Avoid Probate,” Julie Garber, Accessed March 20, 2015