How Can Probate be Avoided? Creating a Living Trust is probably the most common way to avoid probate. However, there are other circumstances which avoid, delay or minimize Probate.
What is a Revocable Living Trust?
The reason for establishing the Living Trust was to give people the opportunity to by-pass probate. Perhaps the key benefit of protecting valuable assets via the trust is protection from probate after your death. However, it’s considered a part of your estate for federal estate tax functions. This is due to the fact that a trustee (not an actual person) is the owner of the trust asset. Therefore, the trustee can easily hand assets over to your loved one, for whom it was intended, after your death. As such the assets avoid probate. The trust document (just like a will) is specified by you; including who will receive the property.
Pay-on-Death Accounts and Registrations
You may convert your bank and retirements accounts to payable-on-death accounts. By filling a form, you will enlist the beneficiary. The finances then pass straight to the beneficiary when you die. You may follow the same process for security registration and even vehicle registration (depending on the state). Several states permit transfer-on-death real estate legal documents; which permits the transfer of an asset with a legal document that isn’t effective till you’re dead.
Joint Ownership of an Asset
There are various kinds of Joint Ownership. Several offer easy methods of preventing probate after the death of the original owner. For instance, you may include instructions for the holding of a title on the document that indicates your ownership. There’s usually no extra document required. After the death of one of the owners, the asset passes directly to the joint-owner – without probate.
Which Types of Property Ownership Avoid Probate?
Joint Tenancy with the Right of Survivorship
With Joint Tenancy, assets automatically transfer to the surviving owners after the death of the original owner, without probate.
Tenancy by the Entirety
In several states, couples usually take title in “Tenancy by the Entirety” instead of Joint Tenancy. While very similar to Joint Tenancy, it’s only available to married couples (or registered gay partners in state of CA). These two processes avoid probate in the same manner.
Community Property with Right of Survivorship
If you are married in California (or registered as domestic partners with the state), and you reside or own an asset in Arizona, Alaska, California, Nevada, Idaho, Wisconsin or Texas, the Community Property with Right of Survivorship is another method of owning an asset with your partner. Assets owned this way will automatically pass to the spouse when the other dies.
Handing properties over to others as gifts while you’re alive is a simply way of avoiding probate. Put simply, if it’s not yours when you’re dead, it can’t pass through probate. That reduces probate cost because the general law is; the more monetary value of an asset that passes through probate, the more expensive it becomes. Also, most gifts don’t go through the federal gift tax.
Simplified Measures for Small Estates
Most of the states recently provides alternatives through probate – or completely avoid it – for “Small Estates.”