Edward A. Haman writes for a living and has authored multiple self-help legal books. He has practiced law in H.
Probate avoidance can save costs, expedite the distribution of assets to beneficiaries, and protect privacy for families.
While some strategies for avoiding probate are quite straightforward, others might call for the help of an experienced estate planning, tax, and probate lawyer.
Probate is the legal process of distributing a person’s assets after their death. It can be a lengthy and expensive process, which is why many people seek to avoid it. In this comprehensive guide, we will explore various strategies you can employ to minimize or eliminate the need for probate.
Understanding Probate
Before diving into avoidance strategies, let’s first understand the basics of probate.
What is Probate?
Probate is a court-supervised process that involves:
- Validating the deceased person’s will (if one exists)
- Appointing an executor or personal representative to manage the estate
- Identifying and valuing all assets
- Paying off debts and taxes
- Distributing remaining assets to beneficiaries
Why Avoid Probate?
There are several reasons why people might want to avoid probate:
- Cost: Probate can be expensive, with court fees, attorney fees, and other associated costs adding up.
- Time: The probate process can take months or even years to complete, depending on the complexity of the estate.
- Publicity: Probate is a public process, meaning anyone can access information about the deceased person’s assets and debts.
- Control: By avoiding probate, you can maintain more control over how your assets are distributed.
Strategies to Avoid Probate
Now, let’s explore various strategies you can use to avoid probate:
1. Keep Your Estate Small:
Most states have a certain threshold for what constitutes a “small estate.” If your estate’s value falls below this threshold, you may be able to avoid probate altogether. Check your state’s specific laws to determine the applicable limit.
2. Create a Living Trust:
A living trust is a legal entity that holds your assets during your lifetime and distributes them to your beneficiaries after your death. Assets held in a living trust avoid probate, as the trust manages the distribution process.
3. Use Beneficiary Designations:
Many assets, such as life insurance policies, retirement accounts, and payable-on-death bank accounts, allow you to designate beneficiaries who will receive the assets directly upon your death. These assets bypass probate and go straight to your designated beneficiaries.
4. Hold Property Jointly:
If you own property jointly with another person, with rights of survivorship, the surviving owner automatically inherits the property upon your death. This avoids probate for the jointly owned property.
5. Consider Transfer on Death Deeds:
Some states allow you to create transfer on death deeds for real estate. This means the property automatically transfers to your designated beneficiary upon your death, without going through probate.
6. Utilize Community Property Laws:
In community property states, assets acquired during marriage are owned equally by both spouses. Upon one spouse’s death, the surviving spouse automatically inherits their share of the community property, avoiding probate.
7. Gift Assets During Your Lifetime:
You can gift assets to your beneficiaries during your lifetime, reducing the size of your estate and potentially avoiding probate. However, be mindful of gift tax implications.
8. Consult with an Estate Planning Attorney:
An experienced estate planning attorney can help you develop a comprehensive plan to avoid probate, taking into account your specific circumstances and goals.
Additional Tips:
- Keep your estate plan updated: As your life circumstances change, review and update your estate plan to ensure it still meets your needs.
- Communicate your wishes: Inform your beneficiaries and executor of your estate plan and their roles in the process.
- Organize your financial records: Keep your financial records organized and easily accessible to facilitate the estate settlement process.
Avoiding probate can save you time, money, and stress. By implementing the strategies outlined above, you can minimize or eliminate the need for probate and ensure your assets are distributed according to your wishes. Remember, consulting with an estate planning attorney is crucial to developing a personalized plan that effectively meets your specific needs and goals.
Joint ownership for other property
Sometimes “joint tenants with rights of survivorship” is abbreviated “JTWROS.”
Any kind of property, including securities, boats, cars, and bank accounts, can be held jointly. Similar to jointly owned property, title automatically transfers to the surviving owner upon the death of one of the owners.
Again, it must be clear that survivorship rights were intended. Similar to real estate, vehicles, boats, and other objects with title documents can be used to prove ownership. Financial accounts (banks, brokerage accounts, etc. ) can also be set up in the same way.
A joint owner obtains certain rights in the property, just like in real estate. For instance, if you designate your daughter as a co-owner of your bank account, she can take money out of the account without your consent.
Establish joint ownership for real estate
Probate will not be required for jointly owned property with a survivorship right. Title automatically transfers to the surviving owner upon the death of one owner. There are three types of joint ownership with survivorship rights:
- Joint tenancy with rights of survivorship. When one owner dies, the other acquires title to the property.
- Tenancy by the entireties. This is similar to joint tenancy with survivorship rights and is available in some states, but it is exclusive to married couples.
- Community property also only for married couples. Only residents of Alaska, Arizona, California, Idaho, Nevada, Texas, or Wisconsin may take advantage of this.
When a joint owner in a tenancy in common passes away, their heirs inherit the interest, which needs to be probated. In cases where the intention of survivorship rights is unclear, it will be presumed that a tenancy in common is present.
A new deed stating the survivorship intention would need to be executed and recorded if the property is not properly titled.
James Smith and Robert Jones, for instance, are joint tenants with survivorship rights; James Smith and Rachel Smith, tenants by the entireties; or James Smith and Rachel Smith, community property with survivorship rights. ”.
The expression “as joint tenants with rights of survivorship, and not as tenants in common” must be used in South Carolina.
The acquisition of certain rights by a joint owner is one disadvantage of joint ownership. For instance, in the event that your son becomes a co-owner of your home, he will need to consent to any sales or mortgages on the asset. Other drawbacks include:
- For estate tax purposes, all or half of the property might be included in the estate of the deceased owner.
- When adding a new owner, the federal gift tax may apply if the property’s value is more than a specific threshold.
- The assets might be liable to judgment debtors or a divorcing spouse’s claim.
ESTATE PLANNING Basics: How To Avoid PROBATE And Why You Need One
FAQ
Are there ways around probate?
Which type of ownership would best avoid probate?
Which of the following assets do not go through probate?
What triggers probate in NY?
How to avoid probate?
Understanding how to avoid probate is crucial in estate planning, as the probate process can be lengthy and burdensome for beneficiaries. By exploring various ways to avoid probate, such as using living trusts, joint ownership, or POD accounts, you can ensure a smoother transition of assets to loved ones.
Do I need an attorney to avoid probate?
While you can do most or all of the work yourself, it’s wise to involve an attorney, if only for advice. Here are six things you can do to avoid probate: Joint ownership of property – You can jointly own property. On the deed to the property (usually real estate), you state how you want that property to be held.
How can I avoid probate if my first owner dies?
Or take advantage of many states’ quick, simple procedures for small estates. Leave property without probate using payable-on-death accounts, registrations, and deeds. Several forms of joint ownership provide a simple and easy means of avoiding probate when the first owner dies.
How can I prevent my real estate from being probated?
Many states allow you to complete and record a transfer on death deed which will transfer your real estate, also referred to as real property, to the named recipient on your death. Another way to prevent your real estate from being probated is to make another person a joint owner of property.