How to Avoid Probate

Probate is the court-supervised process of settling a deceased person's personal and financial affairs. During probate, a Personal Representative is appointed and charged with collecting the decedent’s assets, paying their bills, and distributing their property to the proper heirs. Having your loved one’s property tied up in probate can be stressful, expensive, and often unnecessary, if you know how to avoid it.

EditSteps

EditNaming a Beneficiary

Be prepared to name a beneficiary upon death. Property that lists a transfer on death beneficiary (TOD), or a pay on death beneficiary (POD), passes directly to the named beneficiary, avoiding probate. You may name anyone you choose as a TOD or POD on your financial accounts, vehicle titles, and in some states, your real property. When property passes to a joint owner, TOD, or POD, it passes outside of your estate.
- Your estate consists of all other property, not jointly owned or listing a TOD or POD. To avoid probate, you must ensure that all of your property passes outside of your estate, directly to a beneficiary or joint owner.
- What's the difference between TOD and POD? It's mainly a difference in the type of account each applies to.^[1] Although they are essentially the same, they are used in different circumstances.

Make a trip to the Bureau of Motor Vehicles (BMV) or Department of Motor Vehicles (DMV). Name a TOD on each of your vehicles. Complete a new title application for each vehicle, listing the person of your choice as the TOD. The BMV will then issue a new title showing your TOD designation.

Name a TOD or POD on your checking and savings accounts. You may do this by visiting the bank and filling out a simple form. If you are naming a joint owner, the person you are naming will need to be present and sign a signature card to be added to the account.
- Banks and credit unions will all have slightly different procedures for this, and it may be a good idea to call ahead and ask before you visit in person.
- For your cash held in the bank, you can get a joint account so that if one party dies, the other simply becomes the "owner" of the account and can continue operating the account without any formality being required. Otherwise, there are usually laws that say you can take over an account without probate if a will gives you a right to the money and the sum in the account does not exceed a certain amount, say $15,000. In such a case, you need to provide the bank with a copy of the death certificate, the will and a declaration.

List a TOD or POD on any annuities, retirement savings, CDs, or other investments that you have. Your brokerage firm can provide you with the form to list the beneficiary of your choice.
- Most states have adopted the Uniform Transfer-on-Death Securities Registration Act, which permits TOD designation for investment securities. The act, however, does not require that brokerage firms offer the option, and you may have to name a POD instead.

Call an attorney to discuss your options for naming a TOD on any real property that you own. Real property includes both residential and commercial real estate. Some states allow transfer on death deeds and others do not. A transfer on death deed is just like a normal quit claim or warranty deed that transfers property to a new owner. The transfer on death deed, however, names the new owner and the TOD.
- If your state does not allow transfer on death deeds, you can always name a joint owner for each piece of real estate that you own. Check with a local title company or real estate attorney in order to determine if your state allows TOD deeds.
- When putting property into joint names, the other party becomes the owner by "survivorship." The surviving owner needs to provide evidence of the death of the other party (death certificate) and complete a formal declaration setting out the basis for their entitlement. While you would generally need a lawyer's help with this, the process is far less expensive than probate.

EditCreating a Revocable Living Trust

Create a Revocable Living Trust. A revocable living trust is simply a legal agreement that you can change, or "revoke," in which you name someone, a "trustee," as executor of your affairs.^[2] Should you become mentally incapacitated or upon death, the trustee holds legal title to your property and possessions, as well as executes your will.
- In almost all cases, you'll want a revocable trust, which means that you can change the status of the trust at any time. An "irrevocable" trust means that once you establish it, you cannot change the designation of the trust.
- A "living" trust simply means that the trust is established while you are still alive. You are sole owner of your property and possessions, in charge of all legal decisions surrounding them. Upon death, the trustee gains legal title and decides what to do with the property and possessions, thereby circumventing many aspects of a traditional will.^[3]

Name the trustee. Whom you name as the trustee will have a big effect on how your property and possessions are handled after death. Any competent adult whom you trust can be named as trustee.
- Know that you can name yourself trustee. As trustee, you own all of the property in the trust until your death. Upon your death, a successor trustee of your choice owns the property and distributes it according to your wishes outlined in the trust.
- If you do not wish to name an individual as the trustee, you can also name a bank or a trust company to perform this role. Talk to your lawyer about why and the circumstances in which you would do this.

Talk to your lawyer in order to set up a trust and to discuss advantages and disadvantages of revocable living trusts. A living trust is changeable, helps you avoid probate, and helps ensure your privacy. A living trust, however, isn't perfect for every situation. There are some disadvantages of establishing a living trust:
- Be prepared to maintain trust books and records. This can be burdensome and an inconvenience. Any future assets needs to be tied to the trust, which can take time and maintenance.
- Fees. Whereas a standard will can cost you a hundred or so dollars, the average living trust will cost you ten or twenty times that. It's not uncommon for living trusts to cost $2,000 for lawyers to establish.
- Know that you'll have to re-title a lot of your property to include the trustee. Again, this is not so much a problem as an inconvenience that takes time, effort, and money.

EditSharing Ownership

Practice joint ownership to avoid probate. Probate can be avoided if the property or possessions you own are also owned by another individual, usually a spouse. Take title with someone else so that joint ownership exists. Then, when one of the owners dies, the title simply passes on to the other owner — no probate involved!

Share ownership in one of three ways to avoid probate court. Joint ownership usually circumvents probate in one of three ways:
- Joint tenancy with right of survivorship. In joint tenancy, two or more people own the same real property. Then, when one of the owners dies, ownership of the property transfers to one or more of the sole survivors through the right of survivorship.^[4]
- Tenancy by its entirety. Exactly like joint tenancy, except only for married couples (and in some states, same-sex couples).^[5]
- Community property with right of survivorship. Married citizens of certain states can invoke community property with the right of survivorship, in which property is transferred to one spouse upon the death of the other.

Contact your lawyer and/or real estate advisor to set up joint ownership. In many cases, setting up joint ownership doesn't cost a penny and is relatively simple to do. While you're at it, talk with your lawyer about some of the advantages and drawbacks of creating joint ownership

EditOther Ways of Avoiding Probate

Gift it away. If you don't own the property or possession at the time of death, it can't go into probate. The higher the value of the item, the more expensive it becomes to evaluate in probate.^[6] So be sure to give any expensive items away that you don't want mired in probate proceedings.

Sign over an affidavit. When small estates are reviewed after a death, the state sometimes skips probate altogether if an affidavit is shown. The inheritor must present a signed affidavit detailing entitlement to a certain item of property under law. Once presented, the item of property is released by the person or institution holding the property and goes into the hands of the person with the affidavit.^[7]
- Affidavit releases are not permitted in some states (usually larger ones). Consult your county courthouse for further direction about your state's probate shortcuts.

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EditTips

Avoiding probate does not mean that inheritance taxes will not be due. Inheritance taxes are charged by both state and federal governments on money and property received due to inheritance. You should consult with an accountant or estate attorney to determine if inheritance taxes are due, and learn how to file a return and pay the tax.

For small estates, generally $50,000 to $75,000 or less, small estate affidavits may be used to transfer property to your beneficiaries without involving the Courts. A small estate affidavit is simply a statement, signed under oath that lists the property being transferred, the person to whom it is being transferred, and its value. Each state has a procedure for administering small estates without probate, and while you may still need an attorney to help you with this procedure, it may be far less expensive and time consuming than probate.

Talk to your friends and family about how you wish for your personal property to be distributed upon your death.

If you really want a specific person (family or friend) to have an item, and are unsure if your loved ones will abide by your wishes, simply give it to them now. Countries have different laws about gifting, but are subject to limitations, such as how much you can gift without paying gift duty. You may be able to gift all sorts of property and possibly everything you own before you die. If this is the case, probate will not be an issue.

If you wish to control when a beneficiary inherits the property, you may want to consider creating a trust instead of naming TODs and PODs.

EditWarnings

Naming a joint account owner can cause problems. A joint owner can withdraw all of your money or cause a lien to be placed on the account if they are sued and a judgment is entered against them. Naming a joint owner can also cause you to be responsible for federal gift taxes. Currently, you may gift up to $13,000 to any one person without owing a federal gift tax. Naming a POD or TOD is the safest way to ensure that your property passes to whom you wish, without giving them any interest in it until after your death.

It is essential that you find out what the legal limitations are to avoiding probate before embarking on any avoidance process. Avoiding probate is not right for everyone. If you have a large estate or wish to leave an inheritance to someone receiving government benefits, avoiding probate may not be your best option. These situations may require the assistance of an attorney, and the creation of trusts, in order to avoid large inheritance taxes or your heir being cut off from their government benefits. See a lawyer about this.

While creating a Revocable Living Trust may help you avoid probate, many states in the US require that a successor Trustee petition the court for authorization to administer the Trust. The proceedings for docketing a trust, or asking the court for authorization to administer the trust, and administering it can be just as expensive and long process a probate, as the attorney fees and legal processes are very similar.