Q. How can I avoid probate?
A. Probate is the process by which an executor or a court distributes the property of a deceased person's estate. It can be long and costly -- not something you want your grieving heirs to have to endure. Fortunately, there are many ways to avoid probate.
You'd be best served by reading up on the topic and then consulting a professional. In brief, though, one way to avoid probate is through a living trust or a life estate trust. With a trust, you're actually formally transferring the title of various properties to your heirs before you die. You retain control over the assets while you're alive, but they technically belong to the trust. Once you die, a trustee passes the property on to your specified heirs. This tends to be a fairly quick and simple process.
Also, many states permit a certain amount of property to be inherited without going through probate. In some states the limit is $100,000, for example.
Other possibilities include "payable on death" designations on bank accounts (where the contents of the account pass immediately to the designated beneficiary on your death) and retirement accounts such as IRAs and 401(k)s (where you also specify beneficiaries). Thanks to the Uniform Transfer-on-Death Securities Registration Act, most states now permit securities held by the likes of brokerages to pass to beneficiaries without going through probate.
Learn more about estate planning at Nolo.com and Estate Planning Links and on our Estate Planning discussion board. Also, check out our previous "Ask the Fools" on how much funerals cost and how to plan your will.
If you have any questions, thoughts or opinions on this column, share them with others on our Ask the Fool discussion board.
This question and answer is adapted from The Motley Fool Money Guide: Answers to Your Questions About Saving, Spending and Investing. For answers to this and 499 other common money questions, check it out -- it's a handy resource.
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