Part 2 of 11

By taking some simple steps now, you can spare your family a lot of time and money. How much? Probate court proceedings after a death can drag on for a year and cost tens of thousands of dollars - money that would otherwise have gone directly to your loved ones.

Here are easy, effective ways to skip the probate process, including:

•  naming payable-on-death beneficiaries for financial accounts

owning property jointly

•  leaving real estate with transfer-on-death deeds

•  naming the right beneficiaries for IRAs, 401(k)s and other retirement plans

•  using probate shortcuts for small estates

•  having a trust.

How Are Wills and Trusts Related?

Some trusts, called living trusts, or inter vivos trusts, are separate from your will and are often used in place of a will to avoid probate. Living trusts are not related to wills and can be revocable or irrevocable.

Most are revocable, which means that you can add or remove assets from the trust whenever you want - you can terminate the trust. An irrevocable trust cannot be changed or dissolved once it has been set up. Because the grantor gives up control over the assets in this type of trust, irrevocable trusts are not attractive to most people.

They are useful, however, for life insurance planning and for setting aside an education fund for children. Although a revocable living trust does not provide your estate with tax advantages or protect it from your creditors, an irrevocable living trust does. Both kinds of trusts avoid probate.

One type of trust, called a testamentary trust, is not only related to, but it is actually connected to your will. This type of trust does not avoid probate. While you are alive, a testamentary trust exists only on paper. After you die, however, the trust is activated, and after the assets you’ve earmarked for it go through probate, they are placed in the trust for your beneficiaries.

Because a testamentary trust does not come into existence until you die, it is always irrevocable after that point. However, while you’re alive, just as you can revoke or change your will, you can revoke or amend any testamentary trusts you include in your will.

Many parents use testamentary trusts to help provide for their young children, especially if they do not want the gifts left to the children to be handed over all at once or given as a lump sum. Additionally, people with substantial estates often use testamentary trusts to minimize estate taxes and help protect their property from creditor claims.

THOUGHT OF THE WEEK

“At times, we need to set a loved one free to allow him/her to grow and evolve. Every little sprout must leave the greenhouse and be planted in a larger pot to grow to its full size and bloom.”