We often hear about estate planning tools that help property avoid probate, the legal process that administers an estate. What type of property or method is there to help avoid probate?
1. Joint Tenancy
Real estate that is jointly owned, such as a residence that is jointly owned by a married couple, avoids probate when there is a surviving spouse. When one spouse passes away, ownership remains with the surviving spouse, thus avoiding probate.
2. Life Insurance
Life insurance policies that have a named beneficiary avoid probate, as long as the beneficiary is not actually the estate of the deceased – which may be the case if the life insurance policy is being used to fund a testamentary or will trust. For this reason, life insurance policies are often used to help fund immediate needs after the policyholder passes, giving the beneficiaries quicker access to funds for funeral costs and immediate expenses.
3. 401K and IRA Accounts
Retirement accounts that have a named beneficiary are not subject to probate. Like a life insurance policy, the beneficiary form allows the funds to avoid probate.
4. Living Trusts
A living trust allows property to avoid probate. A living trust is a legal arrangement in which a ‘grantor’, the person creating the trust, transfers ownership of property to the trust and selects a trustee to manage it. They may manage the trust themselves, or the trustee may be a family member or a trust attorney. Upon the death of the grantor, a successor trustee takes over trustee duties (if the person who set up the trust was also acting as the trustee) and they distribute or manage the property for the beneficiaries named within the trust. Since the trust is actually the legal owner of the property, the property avoids probate.
5. Payable on Death Accounts
Payable on death accounts, also known as Totten Trusts, are available at banks, savings and loans and credit unions, usually with no costs associated. You simply need to fill out a form naming an account beneficiary. Claiming money from a Payable on Death account is a simple process, with the beneficiary presenting a certified copy of the death certificate and proof of their identity to access funds. Again, with a named beneficiary form, the property avoids probate.
The Law Offices of Richard B. Schneider, LLC is a member of the American Academy of Estate Planning Attorneys.
