You should gain an understanding of the probate process when you are devising your estate plan. This process can enter the picture when your assets are being transferred after you pass away.
Property that was in your direct personal possession at the time of your passing would become probate property, and it could not be distributed to the heirs until after the estate was probated by the court. In the state of New Jersey, the probate administration process is efficient and streamlined, so it is nothing to fear. At the same time, there are asset transfers that organically take place outside of probate. Let’s look at some of them.
Joint Tenancy With Right of Survivorship
When you own property, you have the ability to add a joint tenant. This person would become a co-owner of the property. If you were to add a joint tenant to the title or deed to property that you own, the joint tenant would inherit your portion of the property after your passing. This transfer would not be subject to the probate process.
Though this can seem like a simple way to facilitate a property transfer, there are some drawbacks to take into consideration. If you add a joint tenant to the title of your property, this person would own half of the property immediately, even while you are living.
As a result, that portion of the property could be in play if the joint tenant was to run into legal, financial, or tax problems. Plus, you would have to have the cooperation of the joint tenant if you ever wanted to sell the property.
Payable on Death Accounts
When you open up an account at a bank or a brokerage, you could add a beneficiary. This is called a transfer on death or payable on death account. While you are living, the beneficiary does not have access to the assets in the account. After you die, the beneficiary that you name would assume ownership of anything that is left in the account. The probate administration process would not come into play.
Once again, this can sound like a good estate planning solution, but there are limitations that you really do not have to accept when you are planning your estate. One of them is the fact that some institutions do not allow you to add multiple beneficiaries. Those that do will often require equal distributions among the beneficiaries. This may not be consistent with your true wishes.
Life Insurance Policies
If you have a life insurance policy on your life, the beneficiary that you name on the policy would be paid by the company after you die, and probate would not be a factor.
Revocable Living Trust
There are also some estate planning devices that can be used to transfer property free of the probate process. One of them is the revocable living trust, and this type of trust can be used by a wide variety of people. You do not have to be a multimillionaire to have a revocable living trust.
You convey assets into the trust, and you can act as the trustee and the beneficiary while you are alive and well. In the trust declaration, you name a successor trustee to take over the role after you are gone, and you name successor beneficiaries.
After your passing, the trustee would follow instructions that you leave behind in the trust declaration. Assets would be distributed to the beneficiaries in accordance with your wishes, and these distributions would take place outside of probate.
A major benefit that you would gain if you utilize a living trust is the ability to include spendthrift protections. You could add a spendthrift provision, and the trust would become irrevocable after you pass away. Because of this, there would be a layer of asset protection for the beneficiaries.
You could also prevent inheritance squandering. The trustee that you name in the trust declaration could be instructed to distribute limited assets to the beneficiaries over an extended period of time.
Learn More About Probate Administration
If you would like to learn more about probate administration and many other important estate planning and elder law topics, we are offering some great opportunities during the coming weeks. Our firm is holding a series of seminars, and there is no charge to attend our sessions.
Though the seminars are free, we do ask that you register in advance so that we can reserve your seat. To obtain further details and registration information, click this link: Warren, NJ Estate Planning Seminars.
- Advantages of Including a Spendthrift Provision Your Trust - June 23, 2022
- Should I Invest in a Pre-Paid Funeral Plan? - June 14, 2022
- What Is the Best Way to Plan for Incapacity? - September 17, 2021
