An estate plan uses the following methods to help avoid probate: Beneficiary Designations, Transfer on Death and Pay on Death designations, Revocable trusts, and Marital Property Agreements
Beneficiary Designations- Many different types of assets allow for nonprobate transfer through designating whom should receive the asset when you die, otherwise known as a beneficiary. As estate planning begins, it is important to review all assets where you can pick a beneficiary to be certain that the beneficiary chosen matches with your estate planning goal. This is doubly important with retirement accounts, which can have significant tax implications if beneficiary designations are not chosen appropriately.
- Types of assets that commonly have beneficiary designations:.
- Life Insurance
- Retirement Plans
- Stocks, Bonds, Mutual Funds, and Brokerage Accounts
- Bank Accounts and Certificates of Deposit
Joint Tenancy and Joint Accounts- Joint tenancy and Joint accounts are both types of property ownership in which both individuals have complete control of the property. This type of property ownership also allows the asset or account to pass outside of probate at the death of one of the joint owners to the other owner. However, unlike with transfer on death or pay on death designations, your co-owner has the full ability to use the property for himself or herself, and the property is subject to any creditors your co-owner may have.
Revocable Trusts- A revocable trust is a written agreement naming an individual (trustee) who will be responsible for managing the property in the trust for the benefit of others (beneficiaries.) Generally, you maintain control over the assets you place in the revocable trust. You may use the assets in any way you choose at whatever time you choose. In the event that you pass away, a person you choose in advance will become trustee and will have responsibility for managing and distributing the property from the trust to the remaining beneficiaries. This allows a seamless transition that has the added benefit of avoiding probate.
Marital Property Agreement- A marital property agreement allows a couple to opt-in or opt-out of Wisconsin’s marital property laws by specifically designating what assets are considered to be marital and what assets are individual. The marital property agreement has the added benefit of allowing transfers of marital property between spouses at the death of one spouse outside of probate through what is called a “Washington Will provision.” However, as is true with much of estate planning, a marital property agreement should be reexamined if either spouse may soon require long-term care.