Many people seek to avoid using a will at all – to avoid the cost and time of probate, to avoid attorney costs, or maybe they just don’t like the legal system. Whatever the reason, there are alternatives to using a will. The following are a few alternative planning strategies:

1. Deeds

This is one of the most over-looked planning tools. My favorite type of deed is what is called a “Ladybird” Deed or “enhanced life estate” deed. These types of deeds allow the present owner of a property to reserve a life estate in their property – that is, they keep the property until they pass away. The owner of that property can do whatever they want to do with the property. Upon their death, the property immediately passes to whoever the owner named in the deed. This completely avoids the probate process. A person may make a Ladybird Deed during their lifetime and record it at the Register of Deeds. Then, once they pass away, even if it is 15 years later, the property will automatically pass to the person on the deed, without any court involvement whatsoever. The person who inherits the property takes the stepped-up basis in the property rather than the original basis, and there is no uncapping of property tax. Therefore, this is an excellent, but often overlooked, planning tool.

2. Trusts

Trusts allow you to provide for other people as you want them to be provided for even after you have passed away. An attorney can draft one that suits your needs. Please see my previous article for more information about trusts.

3. Beneficiary Designations

More and more banks and insurance companies are allowing their clientele to designate a person to inherit any remaining money upon a person’s death. This is one of the absolute easiest ways to pass your property without using a will, going to probate, or involving the legal process at all.  Some insurance companies or banks have rules about who or what (i.e. a trust or LLC) that you can designate as your beneficiary, so check with them before making your beneficiary designations.

4. Create an LLC

Do you have a cottage up North? Want to see it pass down in your family for generations? Create a limited liability company (LLC). These companies can be created for any purpose.  Transfer the cottage to the LLC. Upon your passing, the membership interest in the LLC will be transferred to your children.

LLCs require an Operating Agreement. In your Operating Agreement, you can prevent others outside the family from being able to have a membership interest in the LLC. This keeps the cottage from being exposed to creditors’ claims or your children’s spouses. The Operating Agreement can also provide for the management, use, and  maintenance of the cottage.

If you or someone you know needs any of the above planning tools, then please contact Coltrane & Nye for a consultation.

 

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