Many people establishing estate plans primarily worry about protecting their loved ones. Others want to preserve and protect their assets to maximize their legacies. Particularly in scenarios where individuals have accumulated financial resources throughout their lives, they may worry about what happens with those assets after their passing.
They may not want their financial resources to pass through the probate courts. After all, assets are vulnerable to creditor claims and Medicaid estate recovery efforts during probate proceedings. Additionally, the resources included in an estate can serve as an incentive for family members and beneficiaries to contest a will or fight with one another about the estate.
Keeping financial resources out of probate court can help limit the challenges that arise during estate administration. How can testators ensure that financial assets bypass the probate courts?
By filing transfer-on-death designations
Most financial institutions allow account holders to leave instructions about what happens after they die. People who do not want to add co-owners to the account can make preemptive arrangements for specific people to assume ownership of the account after they die. Financial institutions that allow account holders to file transfer-on-death paperwork create a situation where assets can be transferred outside of probate court.
The intended beneficiary generally needs to know about the account and their right as a named beneficiary. They can go to the financial institution with state-issued identification and necessary documentation of the current account holder’s death. The bank, credit union or other financial entity can then make the beneficiary the new account holder.
This strategy prevents probate conflict and creditor claims. It can limit the likelihood of estate taxes reducing what assets are part of the estate.
By funding a trust
In scenarios where people have robust personal holdings, they may not want to give any one individual total control over their financial assets. They can still keep their financial resources out of probate court by arranging to transfer them to a trust during their life or at the time of their death. They could even use a pour-over will that facilitates the transfer of financial resources to a trust during estate administration.
Reviewing an inventory of assets can help testators develop asset protection plans and estate plans that achieve their personal goals. The right planning can help limit conflict and protect high-value resources.
