Probate Series (Part 2): 3 Common Ways to Avoid It

As with every aspect of your estate, Seiter Law strongly suggests that you contact an experienced estate attorney to discuss, your assets, the probate process and the laws in your state before trying to limit or avoid probate. That being said, in general these are the most common ways to avoid probate:

1. Joint Tenancy With Right of Survivorship (JTWROS)

Do you own property with a spouse or partner? If you do, owning jointly allows the property to pass automatically to your significant other without having to go through probate. It doesn’t matter if you are married or not. If the property is designated a jointly held property, it is going to go to the surviving member of the couple, thus avoiding probate. Just be sure you work with your Estate Planning Attorney to be sure you designate this ownership clearly.

Warning: Be very careful about using JTWROS with non-spouses. Sometimes a parent will make one child a joint tenant on an account or an asset to avoid probate and with the hope that when the parent dies, the child will then share the account with siblings.  This can be problematic – first, the child may not share! Second, if the child does share, it could result in a taxable gift from one sibling to another. Finally, if a child is a joint owner during the parent’s life, this opens that child up to temptations for financial abuse or to misunderstandings with non-owner siblings. So be careful and consult an attorney before trying to take shortcuts.

2. Beneficiary Designations

Designating beneficiaries for your retirement accounts, including IRAs, and life insurance and annuity policies is another way to transfer assets directly to specific people without probate. This way, the assets transfer privately outside of a will and avoid probate. For many non-retirement accounts, you can make designations such as “payable on death” or “transferable on death,” which work like adding a beneficiary. In Arizona, you can also use this type of transfer method with a home or car through beneficiary deeds.

Important: Having multiple accounts/assets with beneficiary designations can add an administrative burden during your life. If a potential beneficiary dies, or if your wishes change, you will need to update your beneficiary designations on every account. Also, some assets that don’t allow for beneficiary designations would still pass through probate unless you do some additional planning. These types of assets include personal property such as jewelry, art and collectibles.

3. Revocable or Living Trusts

A living trust or “revocable trust” coupled with a will is one of the most popular ways to avoid probate. By removing your assets from your name and putting them into the name of a trust, you effectively remove them from your estate. This allows the trust’s assets to pass from the grantor (you) to your beneficiaries (heirs). Your assets stay in the trust while you’re alive. However, when you die, the trust becomes “irrevocable” and distributes assets to your heirs as you designated in your trust documents. If you use a living trust to bypass probate, you’ll also need a will. Using a living trust in conjunction with a will makes sure that any personal property you didn’t place in the trust’s name would move to the trust when you die. There are lots of advantages of using a trust compared to other probate-avoidance options that this blog just can’t cover. For more information, please contact Seiter Law for a FREE consultation!