What Are Some Options to Avoid Probate?

Posted in Probate, Wills & Estates. Monday, Mar 02nd, 2015
Many individuals wish to avoid probate, which is ​defined as ​either (1) the process by which a will becomes judicially verified and administered according to its terms​, ​or (2) the legal process of administering the estate of an individual who died without a will (i.e., died intestate), pursuant to the state’s laws. There are certainly good reasons to avoid probate: it is expensive, time-consuming, and requires one’s personal property to be overseen by a public, court-supervised process. However, this is not to say that the probate process is without advantages: if you have a will, it becomes judicially verified so that no question exists as to its validity​, ​if it is ever disputed; the court oversees the actions of your personal representative (​known as ​an executor, if you died with a will​, ​or an administrator, if you died without a will); and the probate court becomes a forum to resolve any estate disputes that may arise.
​Based on these advantages and disadvantages, you may choose to have some of your assets go through probate and allocate the remainder of it in a way so that it is passed directly to your chosen beneficiaries upon your death, ​bypassing the probate. Alternatively, you may wish to forego the probate process altogether.
Below are some options that allow you to pass on your assets to your loved ones without having to undergo the probate process. These methods all contain risks and pitfalls, so it is important to consult with your lawyer before you make any decisions regarding your assets.
  • Living Trusts​ (also known as inter vivos trusts)​: This instrument is the primary method of avoiding probate. Any assets that you hold in trust do​ ​not become a part of your estate upon your death. Rather, your designated trustee owns the property. After your death, your trustee can easily and quickly distribute your trust property according to the instructions and to the beneficiaries that you specify.  Living trusts may be either revocable or irrevocable. ​You can change a revocable trust at any time by adding, amending, or removing trust provisions​; ​or adding or reclaiming trust assets. However, any assets within the trust will continue to be considered your own, for creditor and estate tax purposes​. ​Therefore​, ​your trust assets are not protected from any creditors who may sue you, and you will be required to pay ​all estate and inheritance taxes on all of the assets held in your name at your death. An irrevocable trust is one that you cannot changed once it is executed. ​Some irrevocable trusts can shield the assets from creditors, such as spendthrift trusts. ​
  • Pour-Over Will:​
    ​This is a popular estate-planning device where the settlor’s will devises property to a trust that the settlor create during his or her lifetime. By its terms, the device “pours over” any property (typically personal property) that you own at the time of your death into the trust that you created during your life. The trust is then distributed by your designated trustee, as described above, thereby avoiding probate.​ These instruments are helpful for many reasons. Most significantly, any property that you’ve left out of your living trust automatically goes into your trust upon your death; as such, that property will not go through probate. Many people also create pour-over wills to avoid the financial and tax consequences of leaving certain property, such as cars and certain topics of stocks, in a trust during the individual’s lifetime. You should discuss these consequences with your attorney before taking action.
  • Payable-On-Death Accounts: Virtually all of your bank accounts, investments, and retirement accounts allow you to designate one or more beneficiaries. These payable-on-death accounts may include pension plans, 401K plans, IRA accounts, life insurance policies, stocks, and bonds. If you are married, some of these accounts may already be partially owned by your spouse. However, by requesting and filling out payable-on-death forms, you can ensure that these proceeds are immediately distributed upon your death
    ​ to the right people​ without passing through probate.
  • Joint Tenancy with Right of Survivorship: If you and your spouse or significant other ​are ​considering purchasing a home together, or if you already own your own home, you may consider establishing a joint tenancy. By owning your home together, ​the property automatically passes to your surviving significant other without undergoing the probate process.  Just make sure that your deed clearly specifies that your property is jointly​ ​held. In addition to houses, bank accounts and investment accounts may also be owned jointly with right of survivorship, as long as both you and your partner are named owners.
  • Gifts: Giving away your property while you’re alive is an obvious and effective method simply because any property that you do not own at your death is not subject to probate. Generally, gifts are not subject to federal gift taxes. However, we urge you to consult with an attorney to determine the tax consequences of any gifts you may wish to make.

For all of these options, it is important to individually name the beneficiaries to which you wish to pass your assets. Should you make your life insurance policy or retirement plans made payable to your estate, it will pass through probate upon your death. Additionally, any bank account, investment account, or real property owned in your individual name (i.e., no joint ownership exists) will also pass through probate.