How to Avoid Probate
Probate is the process that the court uses to bring an individual’s legal and financial affairs to a close after his or her death. The process can be expensive and time-consuming, even if the person has a will. But there are steps that can be taken to ensure that some or all of the person’s property do not go through the probate process. (To learn more about the probate process in general, see our post, “What Is Probate?”).
In many states, property below a certain value can be exempt from the probate process or qualify for an expedited probate process. For example, in some states, if a deceased person’s assets are valued below a certain threshold, those assets do not have to go through probate. In other states, property left to a surviving spouse can go through a simplified probate procedure.
The best way to avoid probate is to create an estate plan, so that assets pass to beneficiaries outside of a will. There are several ways this can be done, as explained below.
Assets that Bypass Probate
Some assets bypass probate automatically. These include IRAs, pension plans, and life insurance. These assets will pass to the beneficiaries without having to go through the probate process. Beneficiaries can also be named on other accounts, such as bank accounts, which will allow those accounts to transfer automatically to the beneficiaries upon the death of the original account owner. It is important to keep beneficiary designations up to date so that these assets pass to intended beneficiaries, rather than to an ex-spouse, for example.
“Transfer on Death” Deeds or Beneficiaries
A transfer on death or payable on death (POD) beneficiary can be named on financial accounts, such as savings, checking, and investment accounts, and on other property, such as vehicle titles. Some states allow transfer on death deeds on real property, which allows real property to transfer automatically on death without the necessity for probate. Like beneficiaries on other accounts, the beneficiaries on these accounts should be kept up to date and reviewed periodically to ensure that they fit in with the overall estate plan since these accounts will pass outside of, and not be controlled by, the will. There may be tax consequences to beneficiaries with these kinds of transfers, so consult with an attorney when choosing this as an option.
Joint Ownership of Assets
In many cases, assets jointly owned by spouses bypass the probate process. For example, if a home is owned by spouses jointly, the spouse can inherit the home without going through the probate process. Joint bank or investment accounts would work the same way, as would any other asset that includes both names on the title.
In some cases, however, joint ownership of property may not bypass probate, depending upon how the asset is titled. For example, if an asset, such as real property, is owned by two individuals jointly as “tenants in common,” where each owner owns only their share of the asset and is free to transfer their share to another without the consent of the co-owner, the asset would have to go through probate because the joint owner will not automatically inherit the deceased co-owner’s share of the asset.
By contrast, if the asset is owned jointly with a “right of survivorship,” the title to the asset gives the surviving owner the right to inherit the deceased owner’s share of the asset, and the asset will not need to go through probate. (Notably, when the last co-owner dies, the property will go through probate unless that owner makes other arrangements to avoid probate, such as using one of the other strategies in this post).
A living trust is another way to ensure that your assets pass to your intended beneficiaries without having to go through probate. Any assets which are transferred to a trust become the property of the trust, rather than the individual.
When a trust is created, a trustee is named to oversee the assets within the trust. These assets can include real estate, bank or investment accounts, and even vehicles. A trust also names beneficiaries of the assets within the trust, and identifies when the beneficiaries should receive those assets, whether they are to be transferred upon the death of the original owner or at some other time, such as when a beneficiary reaches a certain age, etc. There are several different types of trusts, so it is a good idea to consult a lawyer to determine which type of trust is appropriate and to ensure that the trust is properly created and funded to ensure the assets will not pass through the probate process.
Estate planning can be a complex process and an arduous task. An estate planning lawyer can help you determine the best way for you to protect your assets and ensure your family and friends are taken care of upon your death. To obtain help with estate planning needs, find an experienced attorney by quickly posting a short summary of your legal needs on Legal Services Link, and let the perfect lawyer come to you!
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