Through Probate Avoidance Procedures
Although the Probate Process can be navigated, many would feel better if it could be avoided at all costs. The good news is that it can be avoided and it does not have to be costly at all. Probate Avoidance Procedures are becoming increasingly popular. They are simple to employ and can allow you the peace of mind of knowing that your family will not need to go through the court system when you pass in order to have your wishes granted.
Probate Avoidance Procedures
Probate Avoidance Procedures allow your property to legally pass without going through Probate. Not only will these procedures save you time and money, making estate planning more manageable, it will benefit your family in the future. There are several procedures that you can use in order to avoid Probate. Some examples include Joint Tenancy, Listed Beneficiary, Payable on Death Designation, Transfer on Death Deed, or a Revocable Trust.
Joint Tenants with Rights of Survivorship
The first option you may consider is to title your property as “Joint Tenants with Rights of Survivorship.” Having property titled this way makes each person listed on the title a co-owner. This means that everyone has an equal right to the property, whether personal or real. Due to this fact, it is recommended that using Joint Tenancy as an estate planning tool be done in only limited circumstances, such as between spouses.
While using the option of Joint Tenancy is quick and readily available when titling a bank account or a home, there are many possible disadvantages to this Probate Avoidance Procedure. For example, if there was a divorce, bankruptcy, car accident, or garnishment against one of the co-owners, the entire property may also become subject to that co-owner’s claims. That is to say, if you title your bank account as Joint Tenancy with your daughter and your daughter is sued in a collection action, that bank account could be garnished to pay off your daughter’s late credit card bills. Thus the bank account you once considered your own, is now the property of the collection company.
Another and more advantageous Probate Avoidance Procedure you may use is to name a Listed Beneficiary. This is often used for certificate of deposits, stocks, individual retirement accounts, and insurance policies. Generally you are able to make these beneficiary designations on your own. You simply need to contact the company or financial institute that holds your account.
Payable on Death Designation
Another type of Probate Avoidance Procedure that uses a listed beneficiary designation is a Payable on Death Designation, often referred to as a POD. This is another excellent option for all of your accounts that you want to pass outside of probate, but do not want to give someone a present interest in. A POD used on your savings account, checking account, bonds, and the like will allow your property to pass outside of probate. Your listed beneficiary will simply need to have your death certificate in order for the transfer to be made.
Transfer on Death Deed
A final type of procedure which uses a listed beneficiary is a Transfer on Death Deed, or TOD. Since, for many, their home is their largest asset, the TOD is gold when it comes to estate planning. This document will allow your home to pass outside of probate. You may name one or more beneficiaries to receive your real estate. You can choose if you would like to have these beneficiaries hold your property as Joint Tenants or as Tenants in Common.
This decision on how to title your real estate will determine what will happen when one of your named beneficiaries passes away. For example, if you leave your home to your two children as Joint Tenants with Rights of Survivorship then they will be co-owners. If one of your children were to pass away, their interest in the property would remain one-hundred percent with your other child. However, if you decide that you would prefer to allow your grandchildren to have an interest in your home if one of your children passes away, then a Tenancy in Common would be in your best interest. Your loved one would simply need to have your death certificate registered in order to allow the property to pass.
Revocable Living Trust
A final Probate Avoidance Procedure which you may use is through the use of a Revocable Living Trust. A Revocable Living Trust is a document in which you create a Trust and name an individual, a bank, or trust company as the Trustee. Once formed, you are able to transfer your property to the Trust, and the Trustee has the legal responsibility of managing, investing, and distributing the property as you have requested. Revocable Living Trusts avoid probate, are private, and have possible tax benefits.
However, Revocable Living Trusts also have the disadvantage of being costly and time consuming. In order to have a Trust agreement prepared you will need to hire a private attorney, at a cost of several thousands of dollars. In addition, you will have to pay the Trustee to manage your property over the course of the life of the Trust agreement. Finally, due to the fact that all property must be correctly titled within the Trust, you run the risk of ending up in Probate if a mistake is made.
These drawbacks may be worth the sacrifice if you have a large sum of money that you would like to have paid out over a period of time after your death. A Trust may also be in your best interest if you are leaving funds to a charitable organization, have minor children, and/or adult disabled children that are unable to manage their own finances.
Discuss Your Options
Regardless of your situation, as you can see there are options available. It is possible for you to avoid Probate and have your wishes followed. However, it is first necessary for you to decide how you would like to have your estate divided. After you make this decision, speak with those that manage your accounts, your financial institutions, and our experienced estate planning attorneys to assist you in making sure that your requests become the result.
Malissa L. Walden, Esq. Copyright 2006