In most instances, when we die, our estate goes through what’s known as the probate process. The probate process involves many steps. First, our assets and debts are established. Then, taxes and other debts are paid to our creditors. After that, our assets are distributed to our heirs or designated beneficiaries.
Sadly, according to data compiled by Experian, most of us die with significant debt. And, as a result, all too often, our assets go to satisfy these debts instead of being passed to our loved ones.
But, ask any estate planning attorney and they will tell you it doesn’t have to be this way. There are ways to bypass the probate process and avoid having precious family heirlooms or property sold to satisfy our creditors.
Analyzing the information by Experian
Experian, one of three credit bureaus, compiled consumer debt information from December 2016.
After analyzing 220 million American consumers, the data revealed that roughly 73 percent of us die with an average debt of $62,000. (This includes mortgage debt, auto loans, student loans, and credit card debt.)
But, when it comes to the probate process, that debt must be paid first from the proceeds of our estate before anything can be passed to our heirs.
However, there are estate planning tools you can utilize to try and circumvent this.
What you can do to prevent creditors from taking your home and other property
ü Create a joint ownership with rights of survivorship
Adding your spouse, partner, child or loved one to a real estate deed or investment account as a joint owner with rights of survivorship is a way to circumvent the probate process. Creating a joint ownership means that if you pass away, that property will automatically go to the joint owner–and kept away from creditors.
ü Create a revocable living trust
Creating a revocable living trust is another way to bypass the probate process. It is an estate planning tool that involves placing your property (like your home or a family heirloom) in trust to be managed by a named trustee. When you, as the trust maker die, the trustee will distribute the property in the trust to the named trust beneficiaries. It’s revocable, which means that you can make changes to the trust while you are still alive.
Additional options for your circumstance
These are two common tools many individuals use to make sure their property isn’t subject to probate, but there may be more options available depending on your circumstance.
Reaching out to an estate planning attorney thoroughly adept at creating estate planning documents that will protect your property is recommended.
Life is fleeting. Since we all have wishes–and likely property we want to hand down to our children–taking action sooner than later is advised.