For many people, the term “estate planning” is synonymous with wills or possibly trusts. People think about documents that they draft with an attorney as the main components of an estate plan. While that is generally true, a comprehensive estate plan generally requires a number of different documents.
Those with more valuable resources have to plan more carefully to ensure the protection of those resources and that the right person inherits them. Often, testators establishing and expanding their estate plans want to keep their property from passing through probate court whenever possible. Assets that pass through probate are vulnerable to creditor claims and even Medicaid estate recovery efforts. They also increase the value of the estate, potentially putting it at risk of estate taxes.
There is a reasonable solution available for those trying to protect their financial accounts by ensuring that this kind of account isn’t part of their estate.
Accounts can transfer directly to a chosen beneficiary
People trying to establish an estate plan generally want wills or trusts to address their most valuable property. They may also want to address other assets on an individual basis. There are unique solutions available for financial resources, including checking accounts, savings accounts and even retirement accounts.
Most financial institutions allow account holders the option of establishing a transfer on death or payable on death designation. By filing a special form with the financial institution, the account holder can arrange for someone else to directly assume ownership of the account after their death.
The beneficiary designated in the paperwork must physically go to the financial institution with state-issued identification and a copy of the death certificate. If they follow the right procedure, they can assume control of the account without it passing through probate court first.
There are other solutions for protecting financial assets available as well, such as using a financial account to fund a trust. However, that arrangement may limit the account holder’s control over the funds unless they are a trustee.
Keeping valuable assets out of probate court can protect them from creditor claims and limit complications associated with estate administration. People with different resources may need to create robust estate plans that allow them to preserve those assets, and that’s okay.
