I want to help my kids bypass probate when I die — here are 5 assets I won’t put in a living trust

Probate explained: Best not go there

Many folks don’t even know what the word “probate” means until it literally defines them.

This court-supervised process involves many steps and can create mounds of paperwork. It includes (but is not limited to) validating the will if there is one, naming an executor if there isn’t, paying off liabilities and then distributing the remaining assets.

Does it cost money in legal fees and take lots of time? Yes and yes, especially if the estate of the deceased is contested. Though Prince passed away in 2016, the legal dogfight over his estate continues in probate to this day.

Another issue centers around control. During one’s lifetime, anyone “of sound mind and body” — the actual legal phrase — can create a will. It can take as little as 20 minutes on FreeWill, a no-fee, online will-writing service. Go a step further and you can create something called a revocable living trust.

Don’t let the word “trust” intimidate you. In simplest terms, it’s a document that allows you to keep control of your money and property and designate who receives it once you die.

“Revocable” means you can change the terms at any time, so long of course as you’re “living.” As the assets aren't considered a part of your estate, they sidestep the probate process.

It also lets you continue to use assets transferred into the trust: for example, a house or money from investments. Still, the advantages of this trust have their limits and certain items will only create headaches if held there.

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Five items to leave out of a revocable living trust

Even as his granddaughters begged Pete to keep his collection of Beanie Babies out of the living trust and just hand ’em over (such sweet kids), he turned his attention to other things and came up with this list of five priority items to leave out.

Vehicles. Whether it’s a ’63 Corvette, Harley chopper or prop plane, all that’s required to pass it on is a simple written instruction to transfer the title to a beneficiary. In a trust, you’re exposed to lawsuits over accidents that involved the vehicle.

Annuities and retirement accounts. A trust can turn non-taxed accounts into taxable ones. But you can ​make the trust itself the beneficiary so that these accounts pass directly to your trustees without some IRS agent crashing the wake.

Life insurance. Simply name your beneficiaries within the policy. Or, create an irrevocable life insurance trust (ILIT) to avoid estate taxes.

Assets held in other countries. This gets complicated as you may not be able to do it in the first place — and if you can, you'll need to consult an estate attorney licensed in the country where your international assets are located.

Checking and savings accounts. If you use these to pay monthly bills, you may run into financial complications unless you’re the trustee and granted full control of trust assets. There's a much easier route to take: Keep these accounts out of the trust.

All this settled, Pete has earned some well-deserved peace of mind. As for the Beanie Baby thing, he’ll leave that for another day … or maybe probate.

And if Pete were real, he’d surely remind you that the information in this article does not constitute legal advice. Talk to a trust lawyer in your state, financial adviser or other legal/finance professional before making any decisions related to probate protection or trusts of any kind.