If you own a number of properties—be it real estate, stocks, money in the bank, etc.—it is a must that you consider writing your own will. But one issue people have when it comes to wills is the probate fees. This refers to the amount your heirs will need to pay, which will depend on your asset’s value. The probate costs will depend on court fees, accounting fees, attorney fees, bond fees, and appraisal and business valuation fees. There seems to be a lot of fees just to give the assets your heirs rightfully deserve.
The good news is that there are things you can do to avoid these costly fees. Aside from working with a probate attorney in Colorado, here are other ways to lower your probate fees:
Consider joint tenancy
If you already have an idea of whom you wish to leave your possessions when you die, then you can consider joint ownership. Listing your properties under joint ownership allows you to reduce probate costs. This method works well with couples, whether you’re married or not. If you’re married, most states consider this as tenancy by the entirety. With joint tenancy, both individuals already have ownership of the titled property. When one dies, the surviving joint owner automatically receives full rights over the property without probate.
Take note that joint tenancy has its pros and cons. Aside from the right of survivorship, the owners now can enjoy tax benefits and avoid probate. However, this gives the new owner an increased level of responsibility, including increased maintenance and repair costs. Another drawback is that the children of the surviving joint tenant may not automatically inherit the property.
Give your heirs maximum tax-free gifts each year
If you’re now ready to give out your heirs their share of your possessions, then why not start as early as now? Reducing your property means lower probate costs. Know that each state may have different maximum tax-free gift limits. As of 2020, you can gift possessions tax-free as long as it does not exceed the limit. Give more than this amount in Utah and expect to have to pay for gift tax.
If you plan on using tax-free gifts as a way to reduce your probate costs, know that there are rules to follow. For one, there is a lifetime exemption. There is a $5.34 million lifetime exemption, which refers to the cap or maximum amount you can gift in a lifetime. As for your annual tax exemption, you can gift up to 14 thousand worth of gifts each year.
Hold your assets in a trust
Establishing revocable living trusts allows you to determine your property’s heir. Don’t be confused about the similarities between a will and a revocable living trust. Both documents may indicate who your beneficiaries are and allow you to make changes in the document. However, a revocable living trust helps you avoid conservatorship and keep your document private even after your death. You can also minimize the chances of a court dispute along with the probate costs.
All of the assets you put under a trust will automatically put your successor trustee in charge in case of your death. You will need to notarize a living trust document that contains details of the trust. This will include your property, your name (which is the name of the trustee), and the name of your successor trustee.
As early as now, it pays that you determine who your heirs are and what they can get from you in case of your death. This is to avoid confusion and make sure that you get to leave your assets to individuals you prefer. To provide them with the maximum benefits, consider the items on the list. This way, you can reduce or even avoid the probate process.