Five ways to minimize the time and cost of probate

There are some relatively simple things everyone can do to minimize the the time and expense of probate. Probate is the legal process of transferring property to a person's heirs either with or without a Will. Most of the expense incurred in a probate action and much of the time the action may take are directly related to the planning or lack of planning done before death.

It is important to understand that avoiding probate may or may not avoid tax liability. It is very important to consult not only legal counsel but also competent accounting counsel before making any of the changes outlined in this post.

1. The easiest way to avoid probate is to die without any property. Although this statement may seem somewhat flippant, it is entirely possible to transfer all of your property out of your name either into a trust or through gifts to your children or other heirs. Property held in a trust in not normally part of the probated estate. Likewise, any property gifted to others during your lifetime is also not part of your estate upon your death. Although there are limitations, particularly tax consequences of transfers or gifts, with the proper planning you can avoid probate altogether.

2. Hold property in joint ownership with survivorship rights. Real property can be held as joint tenants with a right of survivorship. Likewise, in a community property state like Arizona, property can be held as community property with a right of survivorship. Property held with a right of survivorship does not pass to the recipient as part of probated estate.

3. Hold bank accounts as payable on death (POD) accounts. Some banks will allow an account to be held by two or more people with a designation that any amount left in the account will be payable upon death. These funds are not considered part of the probate estate.

4. Purchase life insurance with heirs as beneficiaries. Life insurance proceed pass directly to the beneficiary and are not considered part of the probate estate.

5. Preserve the stories and give items of sentimental value to your heirs before your death. Sometimes children and grandchildren have no idea of the significance of a family heirloom. If you have any items of particular sentimental value consider gifting those items to your heirs before you pass away. The gift will be much more meaningful if the recipient knows the story behind the gift.

There are more things to you can do to minimize the time and expense of a probate and they will be covered in future posts.