How to Avoid Probate Six Ways

Posted by Anonymous , 9/4/2007 Tags:AvoidProbateSixWays
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How to Avoid Probate Six Ways

Introduction

I've included Six Ways to Avoid Probate (5 of which are free!) below. The information that follows is for educational and informational purposes only and, given that I'm not an attorney, shall not be construed as legal advice. Now that MY attorneys are happy, let's continue. I am, however, a Certified Financial Planner (CFP) Practitioner who specializes in retirement and estate planning with a spotless 21-year reputation in the business, including 14 years in private practice.

Instructions

Difficulty: Moderately Easy

Things You'll Need

  • a list of your assets and how title is held (jointly, sole owner, etc.)

Steps

1

Step One

No cost to establish. Assets owned jointly, as Joint Tenants With Rights of Survivorship (JTWROS) avoid probate as the property passes automatically to the surviving owner by "operation of law" at the first owner's death. The decedent's Will is ignored. It's worth noting that probate avoidance will only occur at the first death, unless the surviving owner re-titles the assets with another person. Speak with a professional before establishing a joint account where non-spouses are involved.
2

Step Two

No cost. Accounts or contracts with designated beneficiaries like IRAs and other retirement plans, annuities, and life insurance avoid probate as the proceeds are distributed to the designated beneficiaries listed on the account. Your Will is ignored.
3

Step Three

No cost to establish. Title your bank account as a Payable on Death (POD) account or ITF (in trust for) account and the account balance will be paid to your named beneficiaries, without probate, at your death. Your Will is ignored.
4

Step Four

No cost to establish. Investment accounts titled as Transfer on Death (TOD) accounts will be transferred to your designated beneficiaries, without probate, at your death. Again, your Will is ignored. As of this writing, 49 states recognize TOD accounts; all but Louisiana.
5

Step Five

Cost involved. Have an attorney draft and execute a Living Trust, transfer your assets to the trust, and those assets so transferred and titled to the trust will be distributed to the trust's beneficiaries without probate. Costs can range, on average, from $1,000 to $3,000, depending on the complexity of the prepared documents.
6

Step Six

Finally, gifting assets avoids probate. Under current law, you may gift up to $12,000 per year, to an unlimited number of recipients, with no gift tax implications.

Overall Tips & Warnings

  • What is probate, anyway? Probate is the legal process of administering a decedent's estate. What is a Will? Drafted properly, a Will is a written document disposing of a decedent's probate assets.
  • While experience may be the best teacher, often times, it's also the most expensive. Speak with a competent, estate-planning professional before attempting a do-it-yourself estate plan.
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