When you decide that it is time to plan your estate and you start to do some preliminary research, one of the first things you will hear about is probate. Probate is the legal process that must be undertaken to administer an estate, and this involves a probate or surrogate court. In a lot of cases probate is largely an administrative process when there is in fact a will in place and no one is contesting it. But if the will is contested, the arguments would be heard in probate court. This can involve anything from the validity of the will itself to the question of actual biological kinship of heirs named therein.
Probate is at the very best a time-consuming hassle, and at worst, it can be a forum for an ugly contested estate battle. Either way, probate carries another disadvantage: it is expensive. The estate has to pay extra probate fees to the court, and there will be attorney fees as well, and sometimes executor fees will be deducted from the estate. These can add up to some significant numbers, frequently in the vicinity of five to seven percent of the overall value of the estate. These expense coupled with the time it takes for probate to run its course (6 months to several years in some extreme cases) are the primary reasons why it can be advisable to avoid probate.
One very simple way of doing so is through the use of pay on death accounts (POD), sometimes called transfer on death (TOD) accounts. With this approach to inheritance planning you simply set up an account and name a beneficiary or multiple beneficiaries to whom the assets would be transferred upon your death. This can be done with bank accounts as well as brokerage accounts in some states, and in Connecticut one can actually transfer ownership of a vehicle in this manner.
Using POD/TOD accounts your heirs do not have to go through probate to receive their inheritance, making then a very useful estate planning tool that everyone should consider.
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