The assets you leave behind when you die usually go through probate. During the probate process, the court reviews your assets before distributing them to your designated heirs or beneficiaries. Although necessary, probate can be costly, time-consuming and stressful, especially if complicated assets like business interests are involved.
Thankfully, there are legal strategies you can use to help you bypass the probate process and transfer assets directly to your beneficiaries.
Revocable or living trusts
A revocable or living trust transfers your assets to your beneficiaries and out of your estate while you are still alive. However, you can still retain full authority over the assets if you name yourself the trustee or co-trustee. Your beneficiary gains immediate authority over the assets held in trust only after your death.
Joint ownership of assets
Setting up joint ownership or tenancy with a right of survivorship allows you to share equal ownership rights to an asset with the joint owner or owners. If one of you dies first, total ownership automatically goes to the survivor. Joint ownership may also be referred to as tenancy by the entirety.
Not all states allow tenancy in its entirety. Although Kentucky allows it for married couples, tenancy by the entirety may only apply to real estate property and not to personal property.
Transfer-on-death deeds
Transfer-on-death (TOD) deeds allow you to name an heir or beneficiary to your real estate property without giving them any authority or ownership claim of the asset while you’re still alive. Since the property will only transfer upon your death, it will not count as a gift. As such, this also allows you to bypass paying gift taxes.
Payable-on-death accounts
Payable-on-death (POD) accounts are like TOD deeds but for bank accounts. With POD accounts, your named beneficiary will only get ownership after you pass away. You can turn the following into POD accounts:
- Savings account
- Checking account
- Money market account
Structure your estate to avoid probate
Early estate planning can help you create an optimal plan for distributing your assets. Consulting an experienced legal professional may help you structure your estate to avoid probate and facilitate faster asset transfers. This can give you peace of mind, knowing your business assets will go directly to your beneficiaries and avoid potential operational problems.