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How to Avoid Probate

There are many reasons you might want to avoid probate proceedings for your heirs. Two of the biggest are that probate often takes a long time and it can be very expensive. Some people also want to keep their financial matters private. Depending on the amount and types of assets in your estate, you have several options for avoiding probate.

Revocable Living Trust

When you put your assets in a trust, they are not considered a part of your estate when you die. The trustee can then distribute those assets as you have directed in the trust document. The key is to be sure that you have placed all probatable assets into the trust. Any omitted assets will need to go through probate proceedings. One way to avoid this is to create a pour-over will, in which you name the trust as your beneficiary. This way, any remaining probate assets automatically become part of the trust.

Payable-on-Death Accounts

Also called transfer-on-death accounts, this is just a fancy way of saying you have designated beneficiaries for specific accounts. You can do this for many types of financial accounts, including bank accounts, brokerage accounts, retirement accounts such as 401(k)s and IRAs, and stocks. Your financial institution can give you a simple form to fill out.

The beneficiaries you name on payable-on-death accounts have no right to the money while you are alive. When you die, they will need to show proof of your death and their identification to claim it.

Joint Ownership

In most cases, joint financial accounts pass to the co-owner automatically when one owner dies. For real property, you may have a few choices for holding the title.

  • Joint tenancy with right of survivorship: Any property held in joint tenancy passes to the survivors without probate.
  • Tenancy by the entirety: This works much the same way as joint tenancy, but is available only to married couples.
  • Community property with right of survivorship: Few states recognize this ownership form. In states that do, it is available only to married couples and offers some tax advantages.

Of course, if you co-own property or financial accounts with someone, make sure you trust that person completely, and that it is the person you want to receive the property when you're gone.

Small Estates

Many states have simplified rules for distributing small estates. Not all of them allow you to bypass probate entirely, but some do. Here are the two most common ways to settle small estates:

  • Affidavits: If your estate is below a certain amount, your heirs can fill out a form claiming the property due them according to your will or state law. The maximum value for estates to qualify for this procedure varies widely by state.
  • Simplified probate: In some states, your heirs will still need to go through a probate proceeding even if your estate is small, but it is straightforward and may not require a lawyer, so it will be less expensive.

Depending on the size of the estate you start with, one way to ensure you have a small estate when you die is to begin giving away property during your lifetime. With careful planning, your gifts can also avoid the federal gift tax.

If you are looking for ways to avoid probate for your heirs, an estate planning lawyer can help you decide which options are best for you.