6 Assets I Won’t Put In A Living Trust To Help My Kids Avoid Probate When I Die
When planning your estate, it’s crucial to make decisions that will ease the financial and emotional burden on your children after your passing. One significant decision involves choosing which assets to include in a living trust to avoid probate.
This legal process can be lengthy, expensive, and public, often delaying your beneficiaries’ access to their inheritance. In this article, I’ll outline six specific assets that I’ve chosen to keep out of my living trust, ensuring a smoother and more efficient transfer to my 3 kids while avoiding the pitfalls of probate.
Probate Explained: Why To Avoid It As Much As Possible
Probate is the legal process that occurs after someone passes away, ensuring the proper distribution of their assets. It can be time-consuming, costly, and public, exposing your family’s financial details to the public eye.
Additionally, the lengthy probate process can delay access to the inheritance your beneficiaries are entitled to receive. By understanding which financial assets can bypass probate, you can make more strategic decisions to protect your family’s privacy and provide them quicker access to funds.
Revocable Living Trust
When considering the management of your estate, maintaining control during your lifetime is crucial. Anyone who is legally competent can create a will, and services like FreeWill offer quick, no-cost solutions.
For added flexibility, you might explore setting up a revocable living trust.
A revocable living trust is a legal arrangement where an individual, known as the grantor, places assets into a trust for their benefit during their lifetime.
The grantor maintains control over the trust assets and can modify or revoke the trust at any time. Upon the grantor’s death, the assets are transferred to beneficiaries as specified in the trust document, bypassing the probate process.
This arrangement provides flexibility and privacy, making it an attractive estate planning tool for financial management and distributing assets.
However, keep in mind that not all assets are best suited for inclusion in such a trust.
6 Items To Leave Out Of A Revocable Living Trust
1. Real Estate
While a living trust is often used to manage real estate, you may choose to exclude properties that are already jointly owned or have a transfer-on-death deed. These instruments allow properties to pass directly to the designated beneficiaries, thereby bypassing probate.
2. Vehicles
Vehicles with transfer-on-death registrations do not need to be included in a living trust. This designation allows the vehicle to pass directly to the beneficiary without going through probate. It’s important to ensure that your state’s laws support transfer-on-death registration for vehicles.
3. Annuities and Retirement Accounts
Retirement accounts, such as IRAs and 401(k)s, along with annuities, should be kept out of a living trust due to potential tax implications. By naming beneficiaries directly on these accounts, you ensure a smooth transition of assets while avoiding the probate process.
4. Life Insurance
Life insurance policies do not need to be placed in a living trust. By designating a beneficiary directly on the policy, the proceeds bypass probate and are paid directly to the named individuals, ensuring swift and private access to funds. Or, create an irrevocable life insurance trust (ILIT) to avoid estate taxes.
5. Assets Held In Other Countries
Assets held overseas might be subject to the probate laws of the jurisdiction where they are located. Establishing an international estate plan, which may involve a separate trust or legal arrangements within that country, ensures these assets pass according to your wishes without being entangled in local probate proceedings.
6. Checking And Savings Accounts
Similar to other assets, checking and savings accounts with transfer-on-death or payable-on-death designations can avoid probate. These arrangements allow the accounts to be transferred directly to the beneficiary, offering a straightforward way to manage and access funds.
By carefully selecting which assets to include in a revocable living trust, you can streamline the estate planning process, reduce costs, and provide your heirs with immediate access to their inheritance, all while maintaining privacy and control over your estate.
Get Professional Advice
The information provided here is for general guidance and should not be considered a substitute for professional advice. For personalized advice tailored to your specific circumstances, please consult a qualified attorney, financial advisor, or relevant professional.
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