Your estate consists of all the assets you own and control when you pass away. You may choose to entrust your heirs with your assets through four key methods:

1. Enter Into Joint Tenancy

Joint tenancy is the most popular way for two or more persons to own the same property. Joint tenants share equal ownership of the property and have equal rights to keep or dispose of the asset.

When all other joint tenants have passed away, the remaining joint tenant receives “right of survivorship” and becomes the sole owner of the property. There is no probate, and 100 percent ownership occurs immediately at the time of death of the other joint tenants.

Assume a husband and wife own bank accounts and real estate as joint tenants with rights of survivorship. When the husband dies, the wife individually and immediately owns 100 percent of these assets. The wife may then create a joint tenancy with a child. When the wife passes away, the child individually and immediately owns 100 percent of the asset.

Keep in mind: assets owned in joint tenancy will pass outside of a Will or Revocable Trust!

Assume that John and Jane Smith have three children. John and Jane own their house as joint tenants with rights of survivorship. The Smiths have a Will or Revocable Trust that gives all their estate assets equally to all three children: Kathy, Carol and David.

Let’s also assume that when John dies, his wife, Jane, signs and files a new deed that creates a joint tenancy with survivorship rights for just one daughter, Kathy. When Jane dies, ownership of the house will pass via joint tenancy to Kathy.

The Will or Revocable Trust will pass all the other Smith assets equally to all three children. Carol and David, however, will not receive their share of the house via the Will or Revocable Trust because assets in joint tenancy pass outside of the powers inherent in a Will or Revocable Trust.

2. Create A Will

A Will is a legal document that contains instructions for the distribution of your estate. Often called a “Last Will and Testament,” this document springs to life when you pass away. It generally costs about $100 to $200 to create a simple Will—well worth the distribution of your life’s collection of assets.

When creating your will, it’s best to hire a lawyer because the document must be signed and witnessed according to state law. The witnesses who watch you sign your Will must attest to the Probate Court, confirming the authenticity of the Will. They usually sign notarized “self-proving” affidavits (a sworn statement attached to your Will) when your Will is signed to keep from having to show up in court.

Although each state has its own unique laws and probate fee schedules, it generally costs about three to four percent of your estate’s value to probate your Will. Roughly half, or about two percent, goes to the court and the attorney for your estate. The other half goes to your executor. If your estate is worth $400,000, then probate could cost your estate as much as $12,000 to $16,000.

So, what if I don’t have a Will? Your state’s legislature has already passed “intestacy laws” that provide for the passing of your estate assets if you don’t have a Will or Revocable Trust. Are these laws designed to meet your unique situation? No. Might some of your estate go to distant heirs you’ve never met? Yes. Is the cost to probate your estate usually more under intestacy laws when you don’t have a Will? Yes.

By creating a Will, you control the future of your estate, ensuring that your loved ones will benefit from your assets.

3. Create A Revocable Trust

A Revocable Trust is a legal document that passes estate assets that have been transferred into the trust. Assets passed via your Revocable Trust do not have to be probated. Thus, if your estate is worth $400,000 and you own all your major assets in the name of your Revocable Trust (i.e., “Mr. and Mrs. Jake Smith Revocable Trust created June 8, 2015”), you could save up to $16,000.

The cost of a simple Revocable Trust is roughly $800 to $1,200, depending on the complexity of your estate. This cost is well worth the distribution of your life’s collection of assets plus avoiding probate costs and fees!

Revocable Trusts, often called “living trusts”, can help manage your assets and provide protection should you become ill or disabled. You hold the power to change or replace your Revocable Trust whenever you wish.

So, where do you begin? You name yourself (and a spouse if married) as First Trustee. You name a trusted loved one (such as a child, niece or nephew who is financially responsible) to be the First Successor Trustee. You then name a Second Successor Trustee if the First Successor Trustee is unable or unwilling to serve. When you pass away, your estate can be distributed according to your wishes by your Successor Trustee.

4. Create A Beneficiary Clause

Beneficiary clauses are methods of distributing assets such as IRA’s, life insurance and commercial annuities, plus bank or investment accounts.

Many financial institutions offer the ability to create a beneficiary clause. You may name the primary beneficiary, such as your spouse, as the recipient of 100 percent of your asset. If they predecease you, you may name secondary beneficiaries, such as children or other heirs, with equal amounts or specific percentages of the account or policy.

If you are employed and utilize employee life or accident insurance benefits, contact your insurance company; many providers offer the ability to complete similar types of beneficiary clauses.

Beneficiary clauses are not probated and also pass outside of a will or revocable trust.

Interested in learning more about estate planning? Visit our “Contact Us” page to connect with an Advisor from American Bible Society.