When you pass away, probate is the legal method of transferring your assets to your beneficiaries. Assets do not always have to go through probate, however. Most people prefer not to go through probate, however, because it is a lengthy and costly process.
When planning your estate, you may want to know which types of assets avoid probate altogether, and what the benefit is to doing so.
Benefits of skipping probate
Assets that must go through probate take longer to get to your intended beneficiaries. On the short end, it will take about six months for things to finalize. On the long end, however, your heirs could wait years to receive anything. Skipping probate greatly reduces the time it will take for your grieving family to receive what you leave to them.
Additionally, probate is costly. Money from your estate will go to pay for court costs, lawyer fees and other expenses related to the process. This decreases the amount of money your beneficiaries ultimately receive. These reasons alone are generally enough for most people to structure assets to avoid probate.
Assets that skip probate
According to FindLaw, the following assets skip probate entirely and go directly to your heirs.
- Property inside of a revocable trust
- Assets that qualify as community property
- Real estate with joint tenancy or tenancy by the entirety
- Retirement accounts with a listed beneficiary
- Real estate with a transfer on death deed
- Bank accounts with a transfer on death or payable on death ownership type
Keep in mind that retirement accounts with a designated beneficiary will only go to that beneficiary, even if they are inside a trust with a different beneficiary. It is important to review your estate plan every several years to ensure your beneficiaries are still correct.