Bypassing Probate with Beneficiary Designations
You may be able to meet your estate planning goals very simply through the proper use of beneficiary designations. You’re likely familiar with beneficiary designations on life insurance policies, 401(k) plan assets, and IRA accounts, but you may not be aware that you can designate beneficiaries on other types of assets as well.
You may establish a transfer on death (TOD) or payable on death (POD) beneficiary designation on your bank accounts. This same type of beneficiary designation is also available with many brokerage accounts. Contact your brokerage company to establish a beneficiary designation on your personal account.
In a few states, you can have a beneficiary designation on your personal property and real estate. Contact your county’s registrar of deeds office to find out whether this option is allowable and to figure out the process to register your beneficiary designation on personal property and real estate.
If you own assets titled joint tenants with right of survivorship, that account already has the equivalent of a beneficiary designation. Your joint owner will automatically inherit 100 percent of the asset balance upon your death.
Assets that transfer to your heirs automatically upon your death aren’t subject to the terms of your will. The ownership of the account (joint tenants with right of survivorship) or the beneficiary designation takes precedence over your will. Those assets will be transferred directly to recipients without going through a long, tedious, and expensive probate process. Your will actually doesn’t become effective until it has been entered into probate. The probate process typically takes 9 to 24 months to complete. By structuring your assets to minimize the number of items and total dollar value of assets that have to go through probate, you will save your executor (the one who you assign in your will to do this time-consuming, thankless job) a lot of time and your estate a lot of money.