Asset Protection: Probate

Proper asset protection means managing one’s assets for an entire lifetime. Even after someone dies, they leave behind their entire estate including real estate property, stock and bond holdings, and any cash savings they may have accumulated over the years. Unfortunately, if these assets are not handled properly, they can be subject to a process called probate after death.

Probate refers to the process after one’s death where the deceased’s processions are inventoried, debts are paid off (sometimes by the selling of assets) and the remaining possessions are distributed among the beneficiaries according the deceased’s will. This process must be done through the court, and therefore can be costly and time-consuming, sometimes taking up to a year to complete. The costs associated with probate are paid from the estate in question, meaning that the probate process can take money away from the beneficiaries of the will. Because of this, the probate process is generally viewed negatively and university law professors and financial advisors across the country usually advise their students and clients to avoid it if possible.

For optimal asset protection, it is important to take the necessary steps to avoid probate. One of the most popular options is the creation of a living trust. A living trust is created when a person is still alive and clearly lays out what assets will be distributed to each of the beneficiaries. The living will can also name a co-trustee (usually a spouse) that can take control of the entire estate upon the death of the first trustee. By writing a living will, both time and money can be saved and privacy can be maintained, providing excellent asset protection. University students studying probate law will not only study these advantages, but will also learn the steps necessary to create a living will that is legally sound.

Another option for asset protection that many university students study is to save money in a Roth IRA retirement account. As many university students will learn, when an IRA Roth account is created, a beneficiary can be named. Upon the death of the owner of the Roth IRA account, the beneficiary immediately gets control of the money in the account, without going through the process of probate. Such a system provides substantial asset protection.