Ways to Avoid Probate
Let's face it, probate can be long, demanding, and paying lawyers can be costly. It can tie up assets for months and sometimes much longer. The good news is that avoiding probate can be accomplished with the right planning. The key to remember is it matters how your assets are titled. Probate is only required when you have assets in your name only and no one can control those assets after your death. Below we have outlined a few tips on how to plan your estate that allows you to sidestep estate administration.
Create a Revocable Living Trust
A revocable living trust can be one of the best ways to avoid probate. By placing your assets in the revocable trust, you personally no longer own those assets. The trust now owns them. So upon your death, the assets in the trust are not subject to estate administration. Your trust controls the distribution of those assets much like a will would. Be careful though, the only way the revocable trust effectively works to avoid probate is if your assets are properly titled in the name of the trust.
Make Real Estate Joint Property
If you have real estate in your name only, at your death that property becomes an estate asset. So what can you do with that property to ensure it stays outside of the estate? If you are married, re-deed the property into both you and your spouse's names as “tenants by the entirety”. This legal form of titling property applies only to married couples and allows your spouse to directly inherit the property upon your death through an automatic right of survivorship.
If you are not married, good news, you can still title property with a right of survivorship, but this type of ownership is called “joint tenancy” or “tenants in common with a right of survivorship.” So if you and another family member or friend own property together with a right of survivorship and you pass away, your friend inherits the property to exclusion of everyone else. The property would not be counted as an estate asset.
Name Beneficiaries on Accounts
One of the easiest ways to ensure that financial assets are not subject to estate administration is to name beneficiaries on your financial accounts. When you pass away, the person who you list on your account receives the assets. Some banks and financial institutions call a beneficiary designation as “payable on death” or “POD” for short. Other banks and institutions use the term “transferable on death or “TOD", or simply calls the person that receives the money the "beneficiary".
Joint Ownership on Financial Accounts
Another way of avoiding probate is to name someone else on your account as a joint owner. When you die, the surviving owner inherits the entire account. However, be extremely careful when placing someone else's name on your account. The joint owner has complete ownership of the account as you do and can use the money without seeking your permission. Also, when you add the other person as an owner on your account you are making a gift of half the value of the account. If the account's value is over $30,000.00 it will be considered a taxable gift.
A Word of Caution
When you add someone as an owner of your accounts or property, or name beneficiaries on account, that person will inherit those accounts despite what your will may say. For example, let's say that Jim has a will that leaves everything to his children but he names his oldest daughter as a joint owner on his bank accounts. He named his daughter on the account because his other children live out of state and he needs someone to have access to his account in case something happens to him. If Jim passes, his will does not control the joint account with his daughter and his other children would not receive any assets from that account. His daughter would receive everything. Unfortunately, this is a very common scenario during estate administration and it can cause major problems.
The lesson here is be careful when adding beneficiaries to an account or owners onto property. While doing so can help those assets avoid probate, it may have unintended consequences that you may have not anticipated.
Questions? Give Us A Call
Attorney John Crow has extensive experience in crafting estate plans that avoid probate. Such an estate plan should ensure that your assets should pass quickly and efficiently to the beneficiaries upon death. By avoiding probate you can potentially save your family thousands of dollars and dealing with the estate administration. Call us today at 931-218-7800 and set up an appointment.