Posted January 5, 2021 by Will Harnish
Does a world exist where people can avoid both probate and estate planning attorneys? Absolutely. All it takes to avoid complex legal documents (even the “simplified” ones found online) and probate court is a little elbow grease and patience.
To avoid probate, one simply needs to make non-testamentary transfers of their assets. Non-testamentary transfers are typically not subject to a will. A trust is a non-testamentary transfer that offers the most customization and control, but here are some ideas beyond creating a trust:
Because financial institutions are contractually obligated to pay money out to a designated beneficiary, payable-on-death (POD) accounts and contingent beneficiary designations can avoid probate if a beneficiary has been properly identified with the financial institution. Beneficiary designations can be made on securities accounts, checking and savings accounts with banks or credit unions, life insurance policies, and accounts held with brokerage firms (including retirement accounts).
A beneficiary designation or assignment can possibly be made in a contract or loan note, which means that the beneficiary has the right to receive payment under the contract or note.
While beneficiary designations can effectively pass assets at death, anyone using this method must stay on top of each account and policy to make sure the designations match current wishes. Further, if a beneficiary dies before the account owner, or if no beneficiary designation is made at all, then such account or policy is likely subject to probate, thereby ruining your plans.
Further, it should be noted that a later-executed will does not override a beneficiary designation. Arguably, neither does a later-executed trust. Make sure any beneficiary designation conforms to any eventual estate plan.
Some accounts can also be held jointly. Joint ownership typically creates the presumption that the parties intended the survivor(s) to own the account outright.
Real property can be titled in the names of several parties as joint tenants with rights of survivorship. Upon the death of one party, the survivor(s) simply provide evidence of such to the county recorder and title vests in the survivor(s). (This is not the case with tenants-in-common.) Check your deed and talk to an attorney if you have any questions about multiple owners of real property.
Title to vehicles can also be held jointly with survivor(s) owning the vehicle outright.
Removing a joint owner of an asset is not easy, as it usually involves a buy-out or settlement agreement, especially where parties do not split amicably.
Further, creating a joint ownership relationship creates the presumption that the parties intended any survivor of the joint ownership to own the property outright. If someone wants to add a child to an account to simply help with finances, then an attorney should be consulted first to discuss issues that may pop up in the future.
Property can also be given away. If there is nothing in the estate, there is nothing to probate. Just give stuff away!
Gifting large ticket items may result in having to file a gift tax return. Ask an attorney the best way to make large gifts to take advantage of exemption amounts.
Also, gifting does not avoid obligations to existing creditors or litigants, or where governmental benefits may be concerned. Fraudulent conveyance laws apply to any conveyance, including gifts.
Avoiding probate (and us lawyers) is possible – you just have to make it all happen.
Posted in Estate Planning, Wills, and Trusts.