As people accumulate wealth and resources throughout their lives, they may become more aware of the need to establish an estate plan. The property that an individual owns becomes part of their estate when they die.
Their resources may need to pass through probate court. They could be subject to creditor claims or Medicaid estate recovery efforts. High-value assets could also put the estate at risk of estate taxes. Testators thinking about the future of their loved ones and their legacy may want to take steps to protect their most valuable assets.
Oftentimes, this process involves trying to keep those resources out of probate court. There are a variety of different strategies that people can use for different types of assets, and the three tactics below are among the most common.
Funding a trust
One of the simplest ways to keep assets out of probate court is to prevent them from being part of the estate. Arranging to fund a trust with certain resources is a way to separate those assets from the estate. People can choose to transfer high-value resources, including real estate, business holdings and financial accounts, to a trust. Those assets then are not part of their estate and do not need to pass through probate court after their passing.
Transfer-on-death designations
When high-value assets are financial accounts, including retirement accounts or investment holdings, it may be possible to arrange to transfer those assets directly to specific beneficiaries after death. Many financial institutions and investment professionals allow account holders to execute transfer-on-death paperwork for their accounts. They select a specific beneficiary who can take immediate ownership of the account after the passing of the current owner.
Adding a co-owner
Property that belongs solely to one individual becomes part of their estate. People can exclude certain assets by taking on co-owners and arranging for that other party to receive their interest in the asset after their passing. For example, holding title to a primary residence as a joint tenant with rights of survivorship can be a way to allow a child or romantic partner to automatically assume ownership of the property after the passing of a co-owner. Jointly-owned assets have more protection than assets that belong to one person.
There are other strategies that can work to protect high-value assets as well. Reviewing personal holdings and legacy goals with a skilled legal team can help individuals establish effective estate plans. With the right tactics, people can maximize what their beneficiaries receive and minimize estate administration complications.
