Probate is time consuming, expensive, and usually unnecessary, it’s a good idea to plan in advance to avoid it. There are several ways to pass property onto your inheritors while avoiding probate. Here are some of the most common ways according to Nolo’s Encyclopedia of Law:
- Revocable Living Trust
The most common way to avoid probate. The advantage of holding your valuable property in trust is that after your death, the trust property is not part of your probate estate. (It is, however, counted as part of your estate for federal estate tax purposes.) That’s because a trustee, not you, owns the trust property. After your death, the trustee can easily and quickly transfer the trust property to the family or friends you left it to, without probate. You specify in the trust document, which is similar to a will, who you want to inherit the property.
- Pay-on-Death Accounts and Registrations
You can convert your bank accounts and retirement accounts to payable-on-death accounts. You do this by filling out a simple form in which you list a beneficiary. When you die, the money goes directly to your beneficiary without going through probate. You can do the same for security registrations, and, in some states, vehicle registrations. A few states also allow transfer-on-death real estate deeds that allow you to transfer property using a deed that doesn’t take effect until you die.
- Joint Ownership of Property
Several forms of joint ownership provide a simple and easy way to avoid probate when the first owner dies. To take title with someone else in a way that will avoid probate, you state, on the paper that shows your ownership (a real estate deed, for example), how you want to hold title. Usually, no additional documents are needed. When one of the owners dies, the property goes to the other joint-owner — no probate involved.
You can avoid probate by owning property as follows:
- Joint tenancy with right of survivorship. Property owned in joint tenancy automatically passes, without probate, to the surviving owner(s) when one owner dies.
- Tenancy by the entirety. In some states, married couples often take title not in joint tenancy, but in “tenancy by the entirety” instead. It’s very similar to joint tenancy, but can be used only by married couples. Both avoid probate in exactly the same way.
- Community property with right of survivorship. If you are married and live in the state of Arizona, another way to co-own property with your spouse is available to you: community property with the right of survivorship. If you hold title to property in this way, when one spouse dies, the other automatically owns the asset.
Giving away property while you’re alive helps you avoid probate for a very simple reason: If you don’t own it when you die, it doesn’t have to go through probate. That lowers probate costs because, as a general rule, the higher the monetary value of the assets that go through probate, the higher the expense. Gift up to $13,000 per recipient per year, aren’t subject to the federal gift tax.
Which methods you decide to choose depends on your personal and financial situation. No one way is right for all people. The Estate Planning Attorneys at JacksonWhite have the knowledge and experience to guide you through making this decision. Please call us to discuss the best ways for your inheritors to avoid probate at (480) 426-8359.