You have spent time and effort creating a wonderful estate plan. But because you didn’t update your assets’ title and beneficiary designations, you unknowingly disinherit your heirs.
Transcript: Wealth Inside and Out® Podcast – “Ways to Avoid Probate on Your Assets”
Hi, my name is Annette Bau (bah oo), and I’m a Certified Financial Planner™ and founder of The Millionaire Insider®.
This is the Wealth Inside and Out® Podcast.
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Introduction
Today, Oscar Alvarez is sharing insight on probate. We are both CFP’s®. Oscar is also a CDFA®, Certified Divorce Financial Analyst. We are not attorneys, but we do a lot of estate planning in conjunction with attorneys.
What is Probate?
Probate is a legal process, and it’s designed to help an estate distribute its assets to the beneficiaries of the deceased. It also ensures that the estate pays any debts it owes.
It is a check and balance. If you can avoid it, it can save time and headaches, which we’ll discuss further.
Completing Your Estate Plan
Many people think they have completed their estate plan but haven’t.
How Assets Pass to Your Heirs
Assets pass via title (such as joint tenants), beneficiaries, and will or trust.
For example
- Real estate and bank accounts pass by the title
- IRAs, annuities, and life insurance pass via the beneficiary
You can complete your estate plan, but you must also update the title of assets and beneficiary designation. If you don’t, you can accidentally disinherit your heirs.
This is why funding your trust (retitling and updating beneficiary designations) is so important.
The Downside of Probate
1. Cost
The cost of probate can be expensive. Examples of fees include:
- Court costs,
- Administrative, filing fees, and personal representative charges
- Costs to transfer property
- Executor fees
2. Complexity
When you have several assets in different states, things get complicated quickly. Various state laws can also add to the complexity.
3. Time
The process can take two to three years 
or more for complex estates. Even a simple estate with a home and a few accounts can take a year, causing your heirs to wait to receive money.
4. Privacy
Probate records are public, which means anyone can get the details.
You can go down to the courthouse and find out exactly how much money somebody has and what assets they have. And for many of us, we prefer privacy. That’s probably one of the main reasons my clients want to avoid probate. I think that’s important.
Ways to Avoid Probate
Trust
An easy way to avoid probate is to create a revocable living trust. A living trust can be changed at any point while you’re still alive.
However, once you pass, the trust becomes irrevocable. It can also be helpful if you’re trying to leave assets for a disabled child or need some other special provision for an heir.
Transfer on Death (TOD) or Payable on Death Designations
If you have a brokerage or bank account, there’s no place to designate a beneficiary or an heir on the account application. TOD or POD allows you to add their name to the title. The money will go to the person named on the title at your death.
Beneficiary Designations
Examples of assets with beneficiary designations include retirement accounts (such as IRAs and 401k plans), life insurance and annuities, and even hybrid long term care insurance.
It doesn’t matter what your will or trust says; they’re sending it to the beneficiary you have named on the account.
Joint Tenancy with Rights of Survivorship or Community Property with Rights of Survivorship
Both of these designations entail adding both owners’ names to the account. Upon the death of the first party, the account immediately goes to the other person.
Pour Over Will
Often, people think a will or a pour-over will avoids probate. That is not the case. A pour-over will enables you to pour over the assets not funded to your trust, but the estate still goes through a probate.
How Often Should You Review the Titling of Assets and Beneficiary Designations?
Most advisors recommend a review every three to five years.
Conclusion – “Ways to Avoid Probate”
Probate can take excessive time, is expensive, and is often complicated.
There are several ways to avoid probate, including a trust, beneficiary designation, and titling.
Until our next episode, take one action that will help you create a secure financial future and retirement you love.
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Thank you so much for joining me for
“Ways to Avoid Probate on Your Assets.”
I’m Annette Bau (Bah oo).
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Bye for now.
