When Is Probate Not Necessary?

The probate process (proving a will valid) and estate administration must be completed in probate court. When someone dies, the probate process and estate administration are the common ways to tie up the loose ends of a decedent's financial life. But formal probate is only required in some situations.

You can use estate planning tools to structure your estate to minimize, if not avoid, probate court. Or your estate may be eligible for a simplified probate process. This planning will allow your loved ones and a surviving spouse to receive their inheritance without the time-consuming process of opening a probate case.

Several estate planning tools are helpful, including the following:

  • Joint ownership of property (real estate, vehicles)
  • Beneficiary designations (bank accounts, retirement accounts, life insurance policies)
  • Death deeds
  • Affidavits
  • Trusts (irrevocable trusts and revocable living trusts)

How do these tools safeguard estate assets while helping the deceased person's family members with faster access to estate assets? Read on to learn about probate avoidance.

Jointly Owned Property

If you have a small estate comprising just a house or car, you may want to consider transferring assets at death using joint ownership rather than a will. This is a cost-effective and efficient estate planning approach for certain types of property. Most real property and personal property can be jointly owned with another, including:

  • Real estate
  • Certain types of personal property (for example, automobiles or boats)
  • Bank accounts and other financial accounts
  • Stocks

Estate planning tools can significantly reduce the probate estate or avoid the time-consuming probate process. State law largely controls the probate process.

Real Estate

It's common for married couples to jointly own their home. In most states, you can own real property as tenants in common or joint tenants with rights of survivorship.

Tenancy in common is the most basic form of joint tenancy. In a tenancy in common, all owners hold an individual, undivided fractional share in the property. Upon the death of a joint tenant, that owner's interest in the property transfers under probate law to an heir.

Joint tenancy with rights of survivorship avoids the legal process of probate. When a co-owner in joint tenancy with the right of survivorship dies, their property interest automatically transfers to the surviving owner. For many people, the marital home is their only probate asset. Thus, titling property as a joint tenancy is one of the most effective ways to avoid probate court.

Financial Accounts

A jointly owned bank account is another estate planning tool. Joint bank accounts are convenient in several situations, such as:

  • Couples looking to pay bills and other expenses together
  • A family member handling the financial affairs of an incapacitated person
  • Parents who are teaching minors about managing finances

Under most state laws, the money in a joint account is not considered a probate asset and will automatically transfer to the surviving owners.

While joint ownership is an effective way to transfer property without going to probate court, there are potential tax consequences. Assets passing outside the probate process may forfeit tax incentives created by state probate law. Income tax issues for jointly owned assets may also exist depending on the estate's value.

Death Deeds

Some states allow property using a transfer on death deed (TODD). A TODD is available for certain types of assets with a deed associated with the property. The deed to the property automatically transfers to the heir upon the decedent's death.

Affidavit for Transfer Without Probate

For example, California allows the inheritor of a vehicle to gain ownership of the decedent's vehicle using an "Affidavit for transfer without probate" form. The heir must show that they are named in the last will and testament and have a right to inherit the vehicle. Affidavits are also used in the simplified probate process to distribute assets from small estates.

Beneficiary Designations

Transferring an asset to a named beneficiary is another common estate planning strategy. Beneficiary designations may be a better option if you are uncomfortable with jointly owning a property with family members.

Beneficiary designations allow you to transfer certain types of assets after your date of death. Beneficiary designations allow you to keep ownership rights during your lifetime while ensuring the property transfers to your beneficiaries at your death. These assets become non-probate assets.

Making a beneficiary designation is easy. You can complete the forms without a probate attorney. Common assets transferred to named beneficiaries with payable-on-death (POD) accounts or transfer-on-death (TOD) accounts include:

  • Life insurance policies
  • Retirement plans (401k plans, individual retirement accounts (IRAs), and 403(b) plans)
  • Annuities
  • Health savings accounts
  • Stock options

After determining that beneficiary designations conform with your estate plan, implement the appropriate designations. You can request the appropriate forms directly from the financial institution. Generally, a designated beneficiary will need proof of identification and the date of death of the decedent. The institution's form determines the specific information required. If there is a need for a change, be familiar with the process to update each named beneficiary designation.

Trusts

You can use a trust to maintain privacy, avoid probate court proceedings, and reduce estate taxes.

  • Trusts may be irrevocable during the lifetime of the donor who funded the trust. Once established, the donor does not control the trust. A trustee maintains the trust. These trusts have tax benefits to the donor during their lifetime and are outside the reach of creditor claims.
  • Trusts can be revocable during the lifetime of the donor. These are revocable living trusts. The donor can change the terms of the trust while they are alive and can control the trust. When the donor dies, a revocable living trust becomes an irrevocable trust.

Both types of trusts allow the grantor to specify conditions for distributing the trust property. Benefits can be spread over some time instead of as a single gift. Assets properly transferred into the trust are controlled by the terms of the trust. The trustee manages the distribution of estate assets. Thus, assets in the trust are non-probate assets, and there is no need for a probate court proceeding. These estate assets transfer outside the probate process and are governed by the terms of the trust and interpreted under state law.

Need Legal Advice on How To Avoid Probate Proceedings?

Discuss your situation with a probate lawyer. Doing so will ensure you have taken all steps to minimize the delays and expenses of a probate case. You can position your loved ones to receive your estate assets promptly.

An estate planning attorney will explain how you can leverage estate planning tools to transfer assets outside a probate court proceeding. A probate lawyer can also discuss any issues relating to your last will and testament or other estate planning documents you may already have. Talking to a local probate lawyer is wise. They can provide legal advice, explain your estate planning options, or assist with probate.

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