When Is Probate Not Necessary?

When someone dies, probate (if they died with a will) and estate administration are the common ways to tie up the loose ends of a decedent's financial life.

Both the probate process (proving a will valid) and estate administration must be completed in probate court. If you want your estate to avoid probate court so your loved ones and surviving spouse can receive their inheritance more quickly, there are several estate planning tools you can use, including:

  • 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 resources? Read on to learn about probate avoidance.

Jointly Owned Property

If you have a small estate that consists of 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. Most real 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
  • Stock

It's common for married couples to jointly own their home. In most states, you can own property as tenants in common or as 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 is transferred 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 is automatically transferred to the surviving owner. This is one of the most effective ways to avoid probate court for many people because the marital home may be their only probate asset.

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 of property is an effective way to transfer property without having to go to probate court, there are potential tax consequences. Assets passing by outside of normal probate procedures may lose out on certain tax incentives created by the probate code in most states. There may also be income tax issues to be aware of with jointly owned assets depending on the value of the estate.

Death Deeds

Some states allow the transfer of property that has a deed associated with it using a Transfer on Death Deed (TODD). The deed to the property automatically transfers to the heir upon the death of the owner.

Affidavit for Transfer Without Probate

California allows the inheritor of a vehicle to gain ownership of title for the vehicle using an “Affidavit for transfer without probate" form. The heir needs to show that they were named in the will and have a right to inherit the vehicle.

Affidavits are also used in the simplified probate process used 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, without giving the beneficiary any ownership in the asset during your lifetime. Beneficiary designation is easy. You can fill out the forms on your own without involving a probate attorney.

Common assets that can be transferred to named beneficiaries with payable upon 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 you have determined that beneficiary designations conform with your estate plan, request the appropriate beneficiary designations forms directly from the financial institution. Ensure that you are monitoring the necessity for each designated beneficiary. If there is a need for a change; be familiar with the process to update each designation.

Trusts

Trusts are used to maintain privacy, avoid any probate court proceedings, and reduce estate taxes.

  • Trusts may be irrevocable during the lifetime of the donor who funded the trust. The donor does not control the trust once it is established. 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 called 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 trust allow the grantor to specify conditions for receipt of benefits. Benefits can be spread over a period of time instead of as a single gift. Assets properly transferred into the trust are controlled by the terms of the trust and there is no need for a probate court proceeding to transfer estate assets. That is managed by the trustee.

Need Legal Advice on How to Avoid Probate Proceedings?

You can ensure your family receives most or all of your estate without the delays and expense of probate court. There are estate planning tools you can use to transfer assets outside of probate court. Talk to a local probate lawyer to understand your options.

Can I Solve This on My Own or Do I Need an Attorney?

  • Complex probate situations usually require a lawyer
  • A lawyer will take these matters seriously and enforce protections
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