People refer to probate like it is a bad thing that you should avoid. However, probate is simply a legal process, and it is not inherently good or bad.
Whether you should take steps to avoid it and how you may do so depends largely on the estate you will leave behind.
Probating your last will and testament
If you create a will, this document goes through the probate process. First, the court must validate your will, and then the executor you have chosen or the administrator the court picks receives authorization to take care of your estate. Before your beneficiaries receive your assets, the executor must pay the debts and taxes you owe. Once this is complete, the asset distribution takes place, the executor closes the estate and the process ends.
Identifying potential probate issues
Particularly if you have many assets, your estate could remain in probate for months or even years. Probate can also be expensive. Your estate may be on the hook for significant attorney fees and executor fees if the process drags on. Also, if you have a number of items that require a professional appraisal for tax purposes, your estate could have to pay a considerable amount in appraiser fees. Another potential downside is that anyone may view the records of your estate’s probate process because probate is public.
The government allows you to gift a certain amount of assets each year with few or no tax penalties. By giving your heirs their inheritance early, they may also benefit from reduced taxes, and they do not have to wait until months after your death to receive the assets.
You could set up a trust, which is a legal entity separate from you, and every asset that you place in the trust does not go through probate. Funding a trust is often as simple as transferring ownership of an asset from your name into the trust’s name.
Accounts such as your bank account or securities may be eligible for transfer on death designation. The account transfers to the person of your choice when you die rather than becoming part of the estate. Similarly, anyone who co-owns property with you may become the sole owner when you die if the two of you hold the title as joint owners with rights of survivorship.