Testators establishing estate plans have to address many different types of assets. They may own real property, including investment holdings and their primary residences. They may have valuable personal property, including fine art and collectibles.
They may also have various financial resources, likely held in accounts at various financial institutions. Financial resources may require a different approach than physical property during estate planning. People can theoretically keep major financial assets out of probate court with the right strategies.
What tactics can help people keep their financial resources, such as checking accounts, retirement savings or investment accounts, out of probate court?
1. Adding beneficiaries as co-owners
It can be a joyful experience to witness loved ones enjoying their inheritance while one is still alive. Many testators make strategic gifts or give their loved ones access to resources to diminish their estates and witness firsthand how their resources can improve people’s lives. When there are two people listed as co-owners of an account, the surviving co-owner typically assumes control over any remaining balance when one owner dies.
2. Submitting transfer on death documents
Most financial institutions allow account holders to file special paperwork addressing their eventual death. Transfer-on-death paperwork allows a specific beneficiary to assume control over an account after the initial owner dies. Transfer-on-death arrangements are beneficial for those who do not want to give loved ones direct access to or control over their financial accounts out of fear of losing resources they need for their financial stability in their golden years.
3. Funding a trust with the account
Resources owned by a trust typically do not become part of an estate when the original owner of those assets dies. People can use financial accounts to fund a trust. They can create rules that give them access to those resources while they are alive and that determine how their loved ones distribute what remains in the account after their death.
Creating estate plans that address specific assets can help people protect their resources by keeping them out of probate court. Individuals concerned about estate taxes, Medicaid eligibility and probate delays may need to strategize to reduce what assets they hold in their own names.
