Probate is the legal process overseen by the court for managing a deceased person's estate, which can often be lengthy and public. Many people want to avoid probate to maintain privacy and make the process easier for their families. While trusts are a common way to avoid probate, other methods are available. 

Why Trusts Avoid Probate

Trusts are widely used in estate planning because they can bypass probate. When you set up a trust, you transfer ownership of your assets to the trust. The trust, rather than you, holds the assets. Upon your passing, the appointed trustee will handle and allocate your assets according to your instructions. Since the trust has the assets, they do not go through the probate process. Trusts include assets like real estate, bank accounts, and personal property.

Other Options Available to You

Besides trusts, there are several ways to avoid probate. 

Joint Ownership

Joint ownership allows the property to transfer directly to the co-owner without probate. When you co-own property with someone, like a spouse or child, it automatically transfers to the surviving owner upon death. This is called "right of survivorship." For example, if you and your spouse own a home together, it will automatically belong to your spouse if you pass away.

While joint ownership is straightforward, it has risks. The co-owner has immediate rights to the property, meaning you cannot sell or refinance it without their consent. Additionally, the property can be affected by the co-owner's creditors or legal issues.

Ladybird Deeds

A Ladybird deed allows you to transfer property upon your death while keeping control during your life. With this deed, you can use, sell, or mortgage the property during your lifetime. The property will be transferred to the named beneficiary after your death, avoiding probate.

This method lets you control your property and protects it from the beneficiary's creditors while you are alive. Ladybird deeds are typically used for real estate assets.

Beneficiary Designations

Many financial accounts, including bank accounts, retirement accounts, and life insurance policies, permit you to name a beneficiary directly. Naming a beneficiary means the assets in these accounts transfer directly to the named person upon your death, avoiding probate. This process is simple and involves completing a beneficiary designation form.

Updating beneficiary designations to reflect significant life changes, such as marriage, divorce, or childbirth, is essential.

Payable on Death (POD) and Transfer on Death (TOD) Accounts

POD and TOD accounts are similar to beneficiary designations. You can set these up for bank accounts and investment accounts. With a POD account, the money in your bank account transfers directly to the named person upon your death. A TOD account works like an investment account, transferring securities to the beneficiary.

These accounts provide a straightforward way to avoid probate for financial assets. Ensure your designations are current to reflect your wishes.

Lifetime Gifts

Giving assets to your loved ones while you are still alive can avoid probate. Making lifetime gifts reduces the size of your estate, potentially avoiding probate. Be aware of federal gift tax rules and how gifting might affect your eligibility for Medicaid if you need long-term care.

While gifting can be a good strategy, once you give an asset, you cannot take it back or control how the recipient uses it. Consider your financial needs and the recipient's situation before making significant gifts.

Build Your Estate Plan with Hamilton Law 

Avoiding probate can make the process easier for your loved ones and keep your affairs private. Schedule a free consultation with Hamilton Law today to explore these options further. Contact us to learn more and get started.