Thursday, May 10, 2012

Ways To Avoid Probate

Probate.  It's a word that sends shivers up people's spines.  As a result, many are interested in avoiding probate.  In my opinion, probate isn't all that bad.  It establishes a fund from which final bills are paid (taxes, funeral, medical, cell phone, etc).  And if you have minor children, it is the process that appoints a guardian.  However, if you are focused on avoiding or minimizing probate, consider the following:

  • gifting during life;
  • titling assets as joint ownership with the right of survivorship;
  • transfer on death deeds;
  • transfer on death (TOD) forms for brokerage accounts;
  • pay on death (POD) forms for bank or credit union accounts;
  • beneficiary forms on retirement accounts and life insurance; and
  • creating a trust during life that holds assets.
Books can and have been written on this subject.  A blog is not a substitute for a lawyer, but rather a venue to create a discussion.  Each state has its own laws that need to be followed.  But a simple tool that may be helpful is doing a cost benefit analysis.  What is the cost of a method listed above versus the cost of probate.  

In Wisconsin probate costs 0.02 percent of the probate assets (those without a form listed above).  So, if $1,000 in value goes through probate, the fee owed the court will be $2 (1,000 x .002).  Compare this with the cost of a trust for example, and you'll have a better idea of whether the probate alternative is a wise move.  Now note, probate fees vary widely from state to state.  Check with an attorney in your state to determine the rate.

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