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If you leave a will, your
assets will be distributed as
you wish, after your will goes
through the probate process.
Probate is the legal
process of “proving” a will is
valid under the law in the
state of your legal residence.
Property you leave through a will
is subject to probate. However,
some states allow exceptions, so
become knowledgeable of your state’s
provisions.
In many states, probate has become
known for both long delays and high
costs in legal and administrative
fees. For some individuals,
avoiding probate is a major focus
of estate planning. Some states
have tried to streamline the
process for its citizens. Even if
there are frustrating delays,
probate does serve useful purposes.
For example, if your estate contains
real estate, probate can provide a
legal record of title transfer.
If your estate has debts or claims
from creditors, probate provides a
fairly efficient forum for placing
those creditors on notice and settling
those claims when compared with the
alternative — a lawsuit.
If you wish to avoid probate,
generally the only way to do so
is to leave your property to your
heirs by means other than a will.
If the ownership is properly structured,
assets you own in certain types of
joint ownership, for example, will
automatically go to the surviving
owner. However, if you and your
spouse are joint owners, in most
community property states, the
surviving spouse may only receive
half the increased value of the
property, rather than the full
increase or “stepped-up basis.”
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Forms Of Joint Ownership
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Joint tenancy with right of survivorship
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Each partner has ownership and property
passes directly to the surviving joint
tenant(s) when one owner dies. However,
when the final owner dies, a will is
required to transfer the assets held
individually by that owner.
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Tenancy by the entirety
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This may help protect assets if
creditors attempt to collect on
an individual debt against the
joint ownership. When considering
joint ownership with a spouse,
you may want to consult an
attorney to see if any special
laws apply to this form of ownership
in your state.
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Tenants in common
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Refers to ownership that
may not necessarily be equal
among the joint owners. With
this arrangement, each joint
owner names a beneficiary in
their wills for the percentage
each owns. With joint ownership
as tenants in common, the assets
will go through probate and not
directly to the surviving joint
owner(s).
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Finally, your will does not
generally affect assets for which
you name a beneficiary, such as
certain trusts, IRAs, pensions,
life insurance policies and
Transfer On Death (TOD) accounts.
These assets and other non-testamentary
assets, will pass directly to whomever
you name and are not subject to probate,
unless you name your estate as your
beneficiary. Understand that joint
bank accounts may be temporarily
frozen during probate proceedings.
Therefore, the survivor should not
plan on receiving this money until
the proceedings are completed.
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Basic Money Management
Basic Money Management
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