Proper estate planning should be discussed with an estate planning attorney and with a tax specialist to develop a strategy that deals with your specific needs. For most individuals, probate is the appropriate method for administering their assets after they pass away. However, there are a number of ways to avoid probate depending on your net worth.
If you have no liabilities, or little in the way of liability and only a small amount of liquid assets, you may wish to use a Transfer On Death (TOD) form or a Pay On Death (POD) form to transfer financial accounts (i.e. bank accounts) and use Beneficiary designation forms to transfer other accounts upon your death. Your bank can provide you with the TOD and POD form, while your broker can provide the appropriate Beneficiary designation forms or Change of Beneficiary forms.
Generally, you should avoid creating joint bank accounts with your children, since your children’s existing or future creditors could potentially seize your accounts. A better approach would be to create a Power of Attorney (POA) if there is a need for someone to have access to your bank account, since a POA does not create an ownership interest in your account by the person named as your agent. However, without a Trust, TOD or a POD, these types of accounts would be part of your probate estate.
For many individuals and couples with a larger estate, a more appropriate method to avoid probate is through the use of a trust. Also, a trust provides many additional advantages that will be covered in future months.
If upon your death, your liabilities exceed your assets and you have no protected assets at the time of your death, there is no need to open a probate. Also, your beneficiaries are not responsible for debt that is solely in your name as long as they do not receive non-exempt assets.