Death is inevitable, and when that time comes, your assets including your financial assets, become part of your estate until they’re legally transferred to your heirs. This transfer of assets can occur in several ways, including through an expensive process known as probate.
So what exactly is probate?
Simply put, it’s where a deceased person’s will is proved, or validated, by the courts, and keep in mind that if you don’t have a will, the state of IL has one for you and you still go through the court system. Assets and other possessions included in the deceased person’s estate are then distributed to the intended heirs.
Probate can be a very time-consuming and expensive process. It typically takes 9 months to a year-and-a-half and the average cost is 6% of the gross estate. Another big downside to probate is that it’s a very public process, where anyone can go down to the county courthouse and see how much money you left to your heirs.
There are 2 things you can do to avoid the probate process
Naming beneficiaries on retirement accounts like IRAs as well as on life insurance policies and annuities should allow you to avoid probate, but it doesn’t always do the trick.
For instance, if you put the word “estate” down as the beneficiary, or if the beneficiary form is blank, you’ve just thrown those assets back into the probate process.
Similarly, if all of the beneficiaries named on the form have passed away those assets will go through the probate process.
Use a revocable trust
Assets titled in a revocable living trust also avoid probate, and the heirs named in your trust remain private, and out of the public eye. Those assets also transfer to your heirs much faster. Typically it can be done in a few weeks. On all other assets other than retirement accounts, annuities, and life insurance, this is the best way to avoid probate.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.