Probate or “probate administration,” is a legal process whereby the probate court oversees the settlement of your estate, ensuring that all interested parties are notified and have an opportunity to be part of the process. A thorough and accurate accounting of the estate is prepared and all final debts and tax obligations are satisfied.
The probate process can take a fair amount of time to complete and can be expensive. Also, additionally, any property that must go through probate can be tied up for many months or may be a few years.
How to avoid probate?
There are a various number of ways you can pass your real estate to your inheritors without the hassle of probate. The strategies we are going to explain are fairly simple compared to others which are very time consuming and take a lot of effort. There is no cookie cutter method which fits. You may have to utilize the technique and strategy in a certain manner based upon your personal finances. Here are a few simple but powerful strategies.
1. PAY-ON-DEATH DESIGNATION- Designating a pay-on death beneficiary is a simple way to avoid probate.You simply name someone to inherit the property at your death however, you remain in full control of your property when you are alive. You can change the beneficiary as you like while you are alive, when you die the real estate or the subject property will be transferred to the person you have named without going through the hustle of probate.
2. INTER VIVOS TRUST OR A LIVING TRUST- this is the most famous form of probate. It is an avoidance technique by which the trust is created by preparing and signing a trust deal and transferring properties into the name of the trust without giving up the possession or control of the trust property. When you die the trust property can be distributed directly to the beneficiaries you have named in your trust. You do not need approval of the probate court.
3. GIFTS -Anything you give away during your life does not have to go through the probate or the procedure. There is a huge benefit for you if you can afford to give $10,000 per recipient per year. These gifts become non taxable provided you can afford it.
4. JOINT TENANCY- joint tenancy is quiet often used for a couple when they purchase a principle residence together and want the survivor to inherit the property. Joint tenancy with right of survivorship is a share ownership where the surviving owner (partner) automatically inherits the share of the owner who dies. Caution shall be taken when you are adding another partner to the ownership of the property to implement joint tenancy.
5. INSURANCE, RRIF and RRSP- if you have life insurance you can designate a specific beneficiary in your policy. The procedure of the policy will not go through probate unless otherwise you name your own estate as beneficiary. Make sure you name beneficiaries on your RRSP and RIFF. You are required a probate or a letter of indemnity from the estate lawyer if your assets are over $30,000.Banks or financial institutions require a letter of action. In case you and your spouse die at the same time consider having a secondary beneficiary.
Much of the information in the above article is general in nature. Legal principles and laws will be considerably different in each jurisdiction. You should not act or abstain from acting based upon information provided without consulting a legal professional. You should not assume that this side is free of errors or that it will be suitable for the purpose that you have in mind. The above information is provided as a guideline for the betterment of your future in Real Estate Investing and is not intended to give a professional legal advice. Please consult a Real Estate lawyer for their opinion on your particular case.