Dear Jonathan: I just completed the probate of my late brother's will. I was the personal representative he appointed to act on behalf of his estate. This was not a pleasant experience and in fact, was quite the opposite and made me realize that I don't want to put my family through anything like this at my death. My wife and I don't have a large estate, but we want to make sure that everything we own goes to the survivor of the two us and then to our kids without first having to go through probate. What do you recommend we do to avoid probate at either of our deaths?
Jonathan: I am sorry that you had such a poor experience in serving as personal representative of your brother's estate. Short of giving assets away prior to death, probate can be avoided by (i) holding property in joint tenancy with full rights of survivorship, (ii) utilizing beneficiary designations, and (iii) creating a revocable trust to hold your assets. These methods for avoiding probate are more fully described below:
Jointly Titled Property. Any property that is jointly titled between a husband and wife will avoid probate upon the death of the first spouse to die at which point the survivor will become the sole owner of those assets. That is the good news. The bad news is that this is only a temporary solution to avoiding probate because those assets will be subject to probate at that spouse's death. Further, if the husband and wife die in a common accident, those jointly titled assets will need to be probated in the estate of the spouse who is considered to have been the last to die even if it's only by seconds. Even though it is unlikely for spouses to die in a common accident, it does happen. For the reasons stated herein, if probate avoidance is your ultimate goal, you should not rely on the joint ownership of assets method to avoid probate.
Naming a Beneficiary. Certain assets which
permit the naming of a beneficiary will avoid probate when the
owner passes away so long as a beneficiary has been named and that
beneficiary is still living when the asset owner dies. In this
event, that asset will pass automatically to the beneficiary
without first having to be probated. For example, if you own a life
insurance policy, the death benefits of that life insurance policy
will not be probated in your estate so long as you have named a
beneficiary to receive those death benefits and that beneficiary is
living at the time of your death. In that event, the proceeds of
the life insurance policy will be paid directly to that beneficiary
without going through probate. When naming a beneficiary, you
should consider naming both a primary and a contingent beneficiary
so that if the primary beneficiary does not survive you, there is a
backup beneficiary named to receive the death benefits. Failing to
name a contingent beneficiary in this instance will cause those
death benefits to be probated in your estate.
You may also be able to set up bank and investment accounts so that
they automatically transfer on your death to a beneficiary you have
named on those accounts. These are known as a TOD (transfer on
death) or a POD (payable on death) designation which you can set up
through your banker or investment advisor.
Revocable Living Trust. If you want to ensure that your assets avoid probate upon your death, you can establish a revocable living trust ("trust") and fund that trust with* certain of your assets prior to your death. The first step is to create the trust. Once the trust has been created, the next step is for you, as the settlor (also known as the "grantor") of the trust, to convey assets to the trust. Once transferred, you will not lose control over or access to those assets. Further, since the trust is revocable you can modify or revoke it, as well as remove assets from it at any time. Any assets owned by your trust as of the date of your death will not be subject to probate. Since you are married, you and your wife could establish a joint revocable living trust and assign both your jointly and individually owned assets to that trust for probate avoidance purposes.
*Not all assets are appropriate for trust ownership
I recommend that you meet with an estate planning attorney who can go over these concepts with you in more detail and help you prepare an estate plan, which includes a trust, that is designed so that probate can be avoided at both yours and your spouse's death.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
