Probate… Ugh! Am I right? When discussing probate with clients, I sometimes feel like I’m talking about Memphis to someone back home (I’m from Knoxville). It’s not that bad! I go there on purpose! I like it there! You shouldn’t be afraid of it!
Why Avoid Probate? Although probate is not as bad as you probably think it is, there are still some very good reasons to avoid it:
- Unnecessary Cost. Why pay unnecessarily to accomplish your wishes?
- No Privacy. Your nosey neighbors will know you cut out one of the kids.
- Delays. It simply takes longer to get your stuff to your family.
How to Avoid Probate? So, how do you avoid probate? Methods include:
- Joint ownership;
- Beneficiary designations; and
- Living Trusts.
Joint Account Ownership and Beneficiary Designations. If you have anybody else’s name on your bank accounts, chances are it’s a “joint account”—also known as “joint tenants with rights of survivorship.” Upon your death, the account is 100% owned by the other owner(s). No probate.
Life insurance, retirement accounts and many other assets allow you to name a beneficiary. Upon your death, these assets are distributed to your named beneficiary. No probate.
Living Trust. What is a living trust (also called a revocable trust)? I’m glad you asked. A living trust is a vehicle for transferring assets and is sometimes referred to as a Will substitute. Your bank and brokerage accounts are transferred to the trust. Your home is deeded to the trust. Your life insurance is paid to the trust.
“Whoa, Nelly! Wait, What!?!?” Don’t worry! It’s all going to be OK! You are still in charge—you are the Trustee! The trust is just for you—you are the beneficiary. Only at your death does anybody else get anything! Meanwhile, the trust is revocable. So, you can cut out those nasty kids if they don’t call or visit! You have not given up a thing… Except probate.
Conclusion. To avoid probate, you must address every asset. Whether it is naming a joint owner, a beneficiary or transferring your assets to a trust, everything must be addressed. Even using the simple methods can be a painstaking process. If you forget a single asset, your estate may end up in probate. Mission not accomplished.
Simple methods are typically appropriate for simple circumstances and vice versa. However, I seldom have a client that thinks of themselves as complicated… Most of clients are really not as simple as they would like to believe… For instance, could a child’s creditors reach a joint account? Maybe not, but would you put your money on it? You may have already…
Using the above methods will help you avoid probate. However, it is still a good idea to meet with an attorney to help you think through the issues and ensure that what you want is what actually happens.