What You Need to Know About Avoiding Probate

Probate is an expensive and tedious process, but it is also avoidable. Here’s what you need to know about how to avoid probate.

An individual has many available options for avoiding probate. Popular methods for avoiding probate include revocable living trusts, joint ownership of property, and estate reduction.

Revocable Trusts

A revocable trust, also known as a living trust, enables owners to retain property control throughout life. The property will move to the trust’s designated beneficiary when the owner passes. As per the name, an owner may revoke the trust at any time.

Revocable trusts are a suitable form of probate avoidance because a trustee owns the trust property upon the owner’s death. The trustee can transfer the trust property to designated friends and family members without probate court. A trust creator should clearly indicate the trust inheritors within the trust document.

Related: How to File a QDRO Without an Attorney

Joint Ownership of Property

Joint property ownership passes property ownership to one owner when the other owner dies. A person can own property in the any of the following ways to avoid probate:

  • Joint tenancy with right of survivorship,
  • Tenancy by the entirety, or
  • Community property with right of survivorship.

Joint tenancy with the right of survivorship allows assets to automatically pass to the surviving owner or owners after one owner dies. The property under the title will not pass through probate.

“Tenancy by the entirety” only applies to married couples or same-sex partners registered with the state. Tenancy by the entirety avoids probate nearly identically to joint tenancy.

Community property with the right of survivorship is a suitable form of avoiding probate for married people who live or own property in select states. A married couple who lives in a community property state receives an automatic transfer of property ownership when one spouse dies. Couples who live in California and register with the state as domestic partners also qualify.

Estate Reduction

An individual with a larger estate may reduce the estate to avoid probate. For example, an owner can give away property through gifts or donations to minimize potential tax burdens and public records of the estate. Removing property from an estate transfers ownership to someone else and keeps it out of personal probate.

Owners who reduce the estate to avoid probate should understand the implications of giving away large gifts. Estate reduction relinquishes control of the property given away and may trigger tax burdens on more valuable property. Understanding Internal Revenue Service (IRS) gift reporting requirements can help property owners avoid probate and remain compliant with the law.

Pay-on-Death Accounts and Registrations

Property owners desiring to avoid probate can convert bank and retirement accounts into payable-on-death accounts. The owner will fill out a form listing a beneficiary, and the beneficiary directly receives the money upon the owner’s death. The beneficiary must go to the bank to show proof of identity and the owner’s death before collecting the account funds.

Related: Family Trust vs Living Trust: The Difference

FAQs About How to Avoid Probate

Why should I avoid probate?

Probate court is an expensive process capable of lasting for a substantial amount of time. Individuals involved in probate court may have to pay executor fees, attorney’s fees, and other miscellaneous costs such as filing fees. The probate court also makes an estate’s finances, including debt, public as part of the process. Most individuals would rather keep personal financial matters private and avoid sharing the information with others.

Can I create a will to avoid probate?

Creating a will does not allow a person to avoid probate, but a will can speed up the probate process. Crafting a document with directions on how to distribute the assets and who will receive them can help the court avoid unnecessary procedures slowing down the process. A shorter process may also save potential beneficiaries money.

Do I have to go to probate if I have a small estate?

Most states have laws providing alternatives for those with smaller estates to avoid probate. An inheritor could claim the property with an affidavit, or the probate court could simplify procedures for a shorter process. Estates must fall under a certain amount in value to qualify for small estate options of avoiding probate.

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