You may be wondering, what is probate and why do I care about it? Well, for assets titled only in your name ("probate assets"), probate is the process such assets go through at your death to make sure that creditors are paid and that the remaining assets are properly distributed to your loved ones. Certain other assets such as life insurance payable to a named beneficiary, retirement assets payable to a named beneficiary, and real estate are “non-probate assets” and don’t go through the probate process.
The probate process is managed by the estates division of the local court. At the initial stage of probate the date of death value of all probate assets must be reported to the court, and at a later date, all income earned by these probate assets must also be reported. A fee will be levied on both the initial value of all your probate assets and on all income those assets earned. In North Carolina, the fee is $.40 per every $100 dollars of income or probate asset, and the maximum fee is $6,000 per estate.
Given the time and expense involved, an obvious question is: can probate be avoided? The answer is “yes” and the suggestions below allow you to avoid probate on some or all of your probate assets:
- Title your bank and investment accounts as jointly with a right of survivorship. Property that is owned jointly with rights of survivorship automatically passes to the surviving owner. Be careful to check the survivorship box on the signature card or other paperwork. Otherwise, ½ the value of that account will still have to go through probate.
- Establish a revocable trust. A revocable trust works in the same way that a Will does to transfer property, but has the added benefit of avoiding probate on assets titled in name of the trust.
- Set up payable on death/ transfer on death designations. Upon your death, a payable on death designation transfers the balance of a checking or savings account directly to the named beneficiary and skips the probate process. A transfer on death designation works the same way on a brokerage account.
The probate process can be time consuming and can be costly, depending on the size and nature of your assets.Using the options listed above can save your loved ones from the future headache of tying up the loose ends of your estate.
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