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Probate: What you should know to plan ahead

Naming life insurance beneficiaries and other ways to avoid the process

You may have heard stories about the complexities and confusions after someone passes away: unforeseen costs, delayed access to funds, legal battles with loved ones. But with proper planning and organization, you can ensure that your estate is well protected and your family easily receives their inheritance, life insurance and financial assets.

Probate—the legal process for distributing assets after someone dies—can seem overwhelming, or something that should be left to a lawyer to figure out. A common misconception is that you can avoid probate if you have a will or small estate. The reality, however, is that some of these assets are still subject to probate court.

Probate can be a long legal process. Often people want to avoid probate to help give their family easier access to what they leave them. In order to determine how to structure your assets for easy distribution, it’s important to understand which assets are subject to probate:

Assets subject to probate:

  • Individual assets—such as personal property—that are solely in the name of the deceased
  • Assets held as “tenants in common” – meaning owned property with people other than your spouse.

Assets that are not subject to probate:

  • Joint accounts such as retirement, investment, and bank accounts, and accounts that are designated as “payment on death” or “transfer on death”
  • Trusts
  • Annuities
  • Life insurance policies with a living beneficiary

Ways You Can Avoid Probate

Name beneficiaries: A good way to ensure that your non-probate assets are distributed directly to your loved ones is by naming beneficiaries for each account or policy. For example, a life insurance policy or retirement account with a named beneficiary will skip probate and the cash benefit will be paid directly to that person. Be sure to name an individual and not your estate. Assets that go through your estate will be subject to probate.

Keep your financial accounts up to date: Anytime you experience a life event, such as a marriage, death or divorce, it’s important to review both the primary and contingent beneficiaries on your policies and investments. This will help ensure your assets avoid probate and that your loved ones quickly receive the assets you leave them.

Talk with a professional: Since probate rules vary by state, it’s a good idea to discuss your options with an estate planner or attorney. This will help you better understand your options, what to watch out for and how you can avoid probate.

This article is provided by New York Life for informational purposes only. Neither New York Life, AARP nor its affiliates provide tax, legal, financial or accounting advice. Please consult your own professional for advice specific to your circumstances.