I hear this all the time, “I’d make a will or a trust but I don’t want my family having to go through probate court.”
Part of me understands that concern. The thought of probate court is, I’ll admit, a bit off-putting. But in reality, it isn’t that bad. In fact, if the deceased took the time to plan of their estate after death, probate can be a walk in the park.
I can say however, that probate court can also be a headache. Especially if the deceased did nothing in terms of planning. Oh, and as to the quoted “excuse” above, let me say this: DIEING WITHOUT A WILL OR TRUST IN PLACE IS ALMOST A GUARANTEED TICKET TO PROBATE COURT.
But this post isn’t about the pros and cons of probate court. This post is about one thing-how to avoid it. Before we get started though I need to issue a small disclaimer. Sometimes probate simply can’t be avoided. But there are ways to lessen the stress and anxiety associated with it.
Below are some tips and tricks to either avoid probate completely or lessen it’s involvement in your estate.
1. LIFE INSURANCE
Probably the most common property left to a beneficiary in a will or a trust is money. In any given will, for example, you may see a clause like this, “I hereby leave the contents of my checking account to….” Or, you may see a clause like this, “I hereby leave $10,000.00 to….”
The problem that you run into, and the reason why probate has to get involved, is when you leave either large sums of money to a beneficiary or you leave money being held by a bank. Many, if not most banks, will require proof that the person claiming to be the beneficiary of the gift is who he/she says they are. And sometimes going through probate is the only way to get the required proof.
But, there is a way for you to accomplish the same goal and completely take probate out of the equation. And it’s called LIFE INSURANCE.
Life insurance is a contractual agreement between the owner of the policy and the insurance company. When the owner of the policy dies, the insurance company agrees to pay out a certain sum of money to whomever is named as beneficiary in the policy.
The beautiful thing about life insurance though is that it’s, what I like to call, “self-terminating.” In other words, the insurance company has to pay the beneficiary as soon as the owner dies. There’s no need to get court approval or anything. Because of this, life insurance policies are not part of your estate at death. Thus, they avoid probate.
So, you could create a life insurance policy, name whomever you’d like as beneficiary, and you’re good to go. Upon your death, your beneficiary will get the sum of money listed in the agreement and will likely never have to see the inside of a court room.
Another great document used by many folks to avoid probate is a Trust.
A trust is a legal document wherein you, the Settlor, place certain property in trust for the benefit of another. You appoint a trustee to manage and oversee the trust and provide instruction as to how the trust property is to be distributed.
But how does a trust avoid probate? Great question!!
A trust, unlike a will, becomes legally binding the moment that it’s created. A will only becomes effective upon death. So, when you place property in a trust, that property immediately leaves your estate. So, there’s no need to go through probate.
Having said that, however, you need to know that there are two general types of trusts-revocable and irrevocable. If you create a revocable trust, probate may have to get involved. This is due to the fact that a revocable trust could, theoretically, be revoked by you right before death. So, if you want to ensure probate court doesn’t get involved, you’ll have to create an irrevocable trust. This results in your having to give up control/ownership of the property you place in trust. So choose wisely.
3. INTERVIVOS GIFTS
Gifting property away while you’re still living is another way of avoiding probate. This option isn’t the most popular among probate avoiders, but it is an option nonetheless.
When you gift property to another, the property leaves your estate (much like in a Trust). Because the property isn’t in your estate at death, there’s nothing to probate.
Of course, most folks don’t want to give all their property away before while they’re still alive. And this is understandable. However, you could gift certain property away and make the probate process a bit less stressful.
4. LIFE ESTATE
This option is similar to #3 above. Let’s say you own some land and you want your children to have it after your death.
You could create a will and leave it to them. But they may have to deal with probate. You could just outright transfer the property to them, but then you’d have no control over it.
What should you do? Another great question!!
Reserve yourself a life estate in the property. Here’s what you do: Click on the TNLD “Deeds” tab above. Fill out the requested information and let our attorneys know that you want to reserve a life estate in the property.
By reserving yourself a life estate, you effectively kill two birds with one stone. You not only transfer the property to your desired person(s), but you also reserve your right to continue using and benefiting from the property during your life.
Upon your death, the property would automatically transfer to whomever you named in the deed, thus avoiding probate as to the property transferred.
5. JOINT TENANTS WITH A RIGHT OF SURVIVORSHIP
This option deals with land more so than personal property, but in the end you avoid probate.
Ownership in land can come in many, many different forms. One particular form of ownership is “joint ownership.” This is when you share ownership in land with another person.
If you own some land and what it to go to a specific person, you could create a deed transferring the property to yourself and whomever you want to end up with it. To make sure the land avoids probate, however, you’ll want to transfer the land to yourself and the other person and also indicate that the two of you will be “joint tenants with a right of survivorship.”
A right of survivorship is a type of joint ownership in land. When one of the joint owners dies, their interest in the land automatically transfers to the other person. No new documents are needed. No court involvement is required. Upon the death of one joint owner, the other joint owner becomes the sole owner outright and immediately.
There you have it. 5 simple options for avoiding probate. Some of these options are more suited for real property (land) than others. But they all accomplish the same goal…avoiding probate court.
Keep in mind though, probate isn’t that bad. In fact, in some situations it’s beneficial…even necessary.
Good Legal Health.