Step 5: reduce or avoid probate

Probate is a legal procedure that is used to settle the affairs of an estate. It ensures that property is distributed appropriately. Probate differs in complexity from state to state but is commonly slow, often tying up estate assets for long periods. It can also be costly with court and other fees being paid from estate assets. As the executor, it may feel the most trying for you! Estate executors routinely take steps to reduce the probate process.

Several methods can be used to avoid or bypass the probate process allowing for a quicker distribution of assets. Some of these may already be in place. If not, and if circumstances allow, initiating difficult conversations now, with a loved one, regarding the distribution of assets may prevent challenges later. It may not be too late to implement some of these strategies. Use your discretion.

Examples of probate avoidance techniques include:

• will
  • If there is no will, one should be created and include the name of the Executor.
  • Estate Attorneys and on-line sources can provide assistance in will creation.
  • If a will exists, have it tested for validity (state law specific). An Estate Attorney or the local Probate Court are good sources to review a will for validity.
• joint ownership with rights of survivorship
  • The joint survivor (tenant) automatically succeeds to full ownership of the property.
  • The other named person is co-owner and has equal rights.
  • commonly used in real estate, bank accounts, and some securities
• beneficiary designation
  • constitutes a contractual or Trust obligation specifying the persons to whom proceeds should be paid
  • commonly used in pensions, 401ks, IRAs, or life insurance policies
• revocable living trusts
  • Similar to a Will, a trust document directs the trustee how to distribute the trust property at the time of death.
  • When a title, held in the name of the Trust, has a beneficiary, or successor trustee, named for the property, the property does not become part of the estate for probate purposes.
• Payable on Death (POD)Account
  • Money passes directly to the named beneficiary.  Account holder retains exclusive rights to the account while he or she is alive, and retains the right to change the beneficiary to the account.
  • used on bank accounts
• Transfer on Death (TOD) Account
  • A TOD account allows a named beneficiary to inherit stocks, bonds, or brokerage accounts without going through probate.  Account holder retains exclusive rights to the account while he or she is alive, and retains the right to change the beneficiary to the account.
  • used for securities such as bonds and stocks
• gifting
  • Give away estate assets while you are alive, to avoid probate.
  • There are statutory limits on the value of gifts in any given year before estate or inheritance taxes will be imposed.

Efforts to avoid probate should be guided by an estate attorney.