Several Ways to Avoid Probate

The term “probate” generally refers to the court procedure for validating a will and transferring assets from the decedent to the heirs. Typically, a probate lasts about a year. In most states a probate is required if the decedent’s probate assets exceed a threshold dollar amount (varies by state). In California, for example, the threshold amount is $100,000.

Avoiding probate is advisable for several reasons:

• Cost – Probate is expensive and may include fees paid to the executors and the attorneys (these are usually determined by state law and are based on the value of the probate assets), appraisers’ fees, accountants’ fees and court costs.
• Privacy – Probate is open to public and may be subject to unwanted publicity.
• Time – Probate will take at least six months, if everything proceeds according to schedule, and can easily take longer.

There are a number of ways to avoid probate:

• Joint Tenancy – A form of title arrangement where the property is owned equally by two or more persons. When one joint tenant passes on, the survivor will receive the property automatically. Joint tenancy between spouses has a disadvantage, because the surviving spouse gets the stepped-up basis only on the deceased spouse‘s share instead of on the entire value of the property.
• Totten Trust – A method of transferring savings accounts to heirs.
• Life Insurance – Life insurance proceeds will be not subject to probate unless the beneficiary is the estate.
• Revocable Living Trust – In addition to avoiding probate, a revocable living trust has the advantage of providing for management of the assets for the heirs after the grantor’s demise. It also provides for management of the assets in the event of the grantor’s incapacity.
• Transfers on Death (TOD) – It allows the owner of securities and securities accounts to name payees to receive the securities and contents of the accounts upon the account owner’s demise.

An estate plan should consist of more than just a will. If avoiding probate is the objective, getting the assistance of a capable attorney or financial planner is definitely a good idea.

This article is for information and education purposes only and does not constitute a personal recommendation or take into account the particular investment objectives, financial situations or needs of individual clients. Clients should evaluate the merits and risks associated with relying on any information provided.