Are Non-Probate Assets Overrated?
Probate is an unpleasant reminder that there is no such thing as a free lunch. You know how, in order to get your income tax refund, you must complete the process of filing your income tax returns, and even when you do that, the refund you receive is a lot less than you were hoping or expecting. The same applies to getting an inheritance through a deceased family member’s will. You only get the money when the estate settles, and the estate only settles after you, in your capacity as personal representative of the estate, pay the estate’s taxes and debts. This means that the money you receive is considerably less than what the decedent left behind. If several relatives receive an inheritance, the one who did all the heavy lifting as personal representative may resent the others who simply twiddled their thumbs until their inheritance arrived. You might think that you are being clever by keeping as many assets as possible out of probate, but non-probate assets can cause a hassle, too, unless you set them up judiciously. For help strategizing about positioning your non-probate assets to bring the greatest benefit to the beneficiaries, contact a Washington, D.C. estate planning lawyer.
If Something Takes Minimal Effort, It Is Probably Not as Simple as It Seems
When someone dies, the person’s property becomes part of his or her estate. The heirs listed in the deceased person’s will do not inherit the property until the conclusion of probate, a legal process where the court ensures that the estate has paid the decedent’s outstanding debts and taxes. Some types of assets can pass to the heirs without going through probate; these are called non-probate assets. Examples of non-probate assets include trusts, life insurance policies, bank accounts with transfer on death (TOD) beneficiaries, and investment accounts with payable on death (POD) beneficiaries.
Shouldn’t you just funnel all your wealth into non-probate assets so your family can inherit from you more quickly and with less expense. If you aren’t careful, though, you can end up causing a hassle for your heirs. Life insurance policies and TOD and POD accounts pay out in a lump sum. That can be good if the beneficiary is an adult family member who is financially stable enough to deal with a windfall. Minors cannot legally inherit property, so the court must get involved if you name them as beneficiaries of life insurance policies or similar non-probate assets.
For young or financially vulnerable beneficiaries, it is a better idea to establish a trust and make it the beneficiary of other non-probate assets. Trusts are also exempt from probate. The beauty of a trust is that it pays out the money to the beneficiaries in installments or even covers some expenses on their behalf.
Contact Tobin O’Connor Ewing About Non-Probate Assets
A Washington, D.C. estate planning attorney can help you set up your probate assets so they can be the most beneficial to your heirs. Contact Tobin, O’Connor, and Ewing in Washington, D.C. or call 202-362-5900.
Source:
msn.com/en-us/money/other/you-need-beneficiaries-for-more-accounts-than-you-think/ar-AA1wRGTZ?ocid=msedgntp&pc=ACTS&cvid=0d2cc741f7fe44a48e4cf55cd4a68feb&ei=30
