As you create a will, you’re essentially just setting up guidelines for how your assets should pass through probate. This is the process by which they will be distributed to your heirs. This is very simple for some individuals and incredibly complex for others, depending on factors like how many assets they own, how many family members they have and much more.
But are all of your assets going to pass through probate? Or are there ways that you could skip the process, at least with some of them?
Life insurance policies
One example of an asset that doesn’t usually go through probate is a life insurance policy. This is because choosing a beneficiary is a necessary step in creating that policy in the first place. The money is paid out to the beneficiary, regardless of all other documentation.
The best way to remember this is simply to assume that the life insurance provider does not care about anything other than the paperwork they have on file. If your will says that your life insurance needs to be split between two individuals, but you only listed one as the beneficiary, the life insurance company is only going to pay your beneficiary. Because this means that the payment is not in your estate, it doesn’t go through probate.
Payable on death accounts
Another example would be a bank account that has been set up as a payable on death account. You can do this when you create the account or at a later date, but you simply are adding a second person’s name to that account. They have no ability to access it or use the funds while you are still alive, but the account automatically transfers into their name when you pass away. Once again, this means that it doesn’t have to go through probate because it is no longer in your estate once you have passed away.
Setting it up
As you can see, there are some complicated estate planning tools you can use. Be sure you know exactly what steps to take to set them up.