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Titling Assets to Avoid Probate

June 04, 2019

Probate is the court-supervised process of authenticating a last will and testament if the deceased made one. It includes locating and determining the value of the decedent's assets, paying final bills and taxes, and distributing the remainder of the estate to the rightful beneficiaries. Probate can be a costly and time-consuming process, but it can be avoided fairly easily.

Below are four ways to avoid probate. Which one applies to you will depend on your desired beneficiaries and other factors. We will be happy to discuss any of the following with you, and will direct you to an attorney if necessary.

Give away all of your property

This is an extreme measure, but of course if you have no property you will not have an estate that will need to be probated. You won’t need an attorney to do this, unless you put all the assets/property into a type of trust that will allow you to draw income from the trust during your lifetime. Naturally, you may want to hold onto your assets so that you have enough on which to live. You will also need to be careful regarding how to report gifting.

Put your assets into joint ownership

Not all joint titles are created equal. To avoid probate you will want to title as joint ownership with rights of survivorship or tenancy by the entirety (if you are married). Note that you can put some assets into joint ownership without being obligated to do that with others. Know that there are issues to be aware of regarding joint titling and which relate to gifting, disposition of the assets in the case of an account holder being sued or divorced, and other issues that should be discussed prior to changing the title.

Use beneficiary designations

Of course, life insurance and various retirement accounts allow you to name beneficiaries, which avoids probate. You may also designate beneficiaries for your non-retirement investment or bank accounts. This is referred to as a "transfer on death" (TOD) or “payable on death” (POD). Some states also allow you to do a transfer on death on real estate assets. You don’t necessarily need an attorney to put non-retirement assets into POD or TOD titles.

Use a revocable living trust

This is something you should definitely discuss with an attorney. You must be careful to properly fund the trust. If any of your assets are not included in the trust and are also not covered under one of the avoidance vehicles above, then they are included in your probate estate.

Which of the above will actually work for you will depend on your own unique family and financial situations. Let us know how we can help.

by Ronald Donato, Jr., CFP®, MBA
Director of Financial Services