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If you are engaged in estate planning, you may wonder how you can avoid probate. Probate is the judicial process that occurs within the United States when a person dies with a will. Probate can lead to the publication of information about assets, such as when a will is read or if a will is contested. It can also lead to the assessment of inheritance or estate taxes. As a result, many individuals wish to avoid probate upon their death.
One way to avoid probate is to die without a will or to die intestate. This is the worst way to avoid probate and is not advisable. If you die without leaving a will, intestacy statutes will determine how your assets are distributed. Since no will is read or probated, you will avoid the probate process, but your family may be faced with even higher taxes and there may be heated debate in court as to what will occur as far as the distribution of your assets.
Fortunately, there are several better ways to avoid probate. First, you can begin distributing your assets while you are still alive. This can be done through making direct gifts to your spouse, children or other individuals to whom you want to leave your possessions to. If you distribute these things while you are still alive, you can reduce the value of your estate and, if you give away enough, can potentially even deplete the estate to the extent to which there is nothing left for you to will to anyone and no need for probate.
If you do opt to try to deplete the estate entirely to eliminate the need for probate, make sure you understand the laws regarding giving away your assets. Generally, you can give tax-free gifts from each individual parent to each child up to the amount of $24,000 US Dollars (USD) without incurring gift taxes. You may also be able to pay student loan bills or other types of bills directly to the lender in any amount without triggering gift tax.
You can also aim to avoid the probate process by placing assets into a trust with joint ownership. This means you essentially split the property rights of your assets. The trust itself owns the assets in full, and you have the right to use those assets while you are alive, while the person named as the beneficiary on the trust will have the right to inherit those assets upon your death. Since the trust owns the assets, the assets pass seamlessly to the beneficiary without the probate process occurring.
Good points -- the best thing someone can do for their heirs is to figure out how to avoid probate altogether. This can be done through trusts, financial accounts that are payable on death to heirs, etc. Probate can be expensive and it is a shame to watch assets get eaten up by that process instead of going to heirs.
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