Six Ways to Avoid Probate

Whether or not you understand the probate process, you may have heard that it’s better to avoid it. Whether you believe this advice or not, you can manage to bypass probate when you die through several processes. When you bypass probate, this means that your estate will go to your beneficiaries without court proceedings. When you avoid court, one thing is certain – you can save time and money.

States continue to revise probate laws to make them more consumer friendly, particularly for small estates. And, some good reasons exist for you to distribute your property by will. When you pass on assets through a will, these decisions are binding and have legal finality. Creditors who fail to file claims against your estate, usually within six months after receiving notice of your death, are out of luck.

But, if you want to avoid the six- to nine-month time frame that exists to handle most probates, and your estate or assets don’t warrant a costly court process, you might consider one of the following ways to avoid the probate process:

  1. Own property as joint tenancy with rights of survivorship: Assets owned as joint tenancy with rights of survivorship pass automatically to the surviving joint owner(s) when you die. To establish joint ownership, you may need to record new real estate deeds, titles for your car or boat, stock and bond certificates, statements of account for mutual funds, registration cards for your bank accounts, and other assets. This costs little and usually does not require a lawyer. Some drawbacks are that the joint owner has immediate access to your property, and your joint owner’s creditors may reach the jointly held property.
  2. Designate beneficiaries: If you can establish payable-on-death provisions (POD) for your savings accounts and other bank assets, those accounts can pass outside probate. You also can ask your brokerage agent to set up transfer-on-death provisions for brokerage accounts that contain stocks, bonds, or mutual funds. Your retirement accounts, such as profit-sharing plans, 401(k)s, and IRAs can also pass along to designated beneficiaries. Finally, life insurance death proceeds will avoid probate, provided you name a beneficiary other than your estate.
  3. Make lifetime gifts: You can avoid probate by giving away your assets while you’re still alive. If you’re careful, planned gifting can also help your assets avoid gift and estate taxes. Some nontaxable gifts include gifts to your spouse, to qualified charities, gifts totaling $13,000 (in 2009) or less per person per year, tuition payments on behalf of an individual directly to an educational institution and medical care paid directly to a provider on behalf of another person.
  4. Transfer your assets to a revocable living trust: A revocable living trust (also known as an inter vivos trust) is flexible enough to include almost any asset you own. While you are living, you can act as the trustee and can add or remove property as you see fit. You also can terminate or amend the trust at any time. When you die, your successor trustee distributes the trust assets to the trust beneficiaries, according to the trust agreement. The downside is that many trusts are more expensive to create and maintain than probate court processes. Additionally, a revocable living trust does not shield your estate from your creditors, creditors of your estate, or estate taxes.
  5. Notarized Affidavit: If you manage to give away most of your estate while you’re living, your beneficiaries can claim your remaining assets by presenting a notarized affidavit. Some states allow up to $100,000 to be distributed without probate. But, check with your state laws before you pass on your wishes. In general, real estate usually is disqualified from claims by affidavit. Therefore, your estate may qualify even if it is fairly large. Expect the process to take 30 to 45 days.
  6. Simplified Probate: Although this is not a method to avoid probate, it is a more streamlined process. Your executor can file for this simplified probate, which generally consists of a paper filing only that does not require an attorney. State laws vary widely regarding the allowable size of an estate for simplified probate.

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