The bad news: When a person dies owning property in their sole name without a beneficiary, their loved ones will have to go through a court-supervised process called probate to transfer the property from the deceased person's name to the name of the intended beneficiaries or heirs at law. Going through probate court may lead to various expenses, including fees for attorneys, executors, appraisers, accountants, court filings, and other costs required by state law. Depending on the probate's complexity and the estate's value, fees can easily run up to tens of thousands of dollars in some states. 

The good news: Many costs can be reduced by avoiding probate altogether. It is that simple. Here are three ways to avoid probate and its related costs. 

1. Name a beneficiary. The probate process applies only to accounts and property in a person's sole name that do not have a beneficiary, payable-on-death (POD), or transfer-on-death (TOD) designation at the time of their death. Accounts and property with a beneficiary designation will be transferred to the designated individual immediately upon the owner's death without any probate court involvement. It is common to designate beneficiaries on these types of accounts and property: 

        ●        Life insurance policies

●        Annuities

●        Retirement plans

●        Real estate (if available in your state)

 Caution: When someone is named as a beneficiary of an account or property through a beneficiary designation, they will receive that account or property outright and without any conditions. This means it could be vulnerable to claims by the beneficiary's creditors, judgments, or a divorcing spouse. Naming a beneficiary also means giving up the ability to impose restrictions on how the beneficiary uses the account or property they receive. Lastly, naming a beneficiary does not assist if you become unable to manage your affairs. The designated beneficiary will only access the account or property after your death and not during your incapacity. You will need to rely on a financial power of attorney or a court-appointed conservatorship or guardianship to manage the account or property if you are unable to. 

2. Own accounts and property jointly. Probate can also be avoided for accounts or property you own if they are held jointly. Similar to a beneficiary designation, joint ownership automatically transfers the deceased co-owner's share to the surviving co-owners immediately upon the person's death without the need for probate court. There are several types of joint ownership that you can set up to avoid having to go to probate court to transfer a co-owner's interest

●        Joint tenancy with rights of survivorship. With this type of joint ownership, a deceased co-owner's interest in the property simply transfers to the remaining joint tenants (co-owners) upon the deceased co-owner's death.

  ●        Tenancy by the entirety. This is a special form of joint tenancy with a right of survivorship only available to married couples in some states.

State laws play an important role here. We can help you determine which form of joint ownership, if any, is a good fit for you.

Caution: Just like with beneficiary designations, adding a joint owner to your accounts or property can make them vulnerable to claims from the new joint owner's creditors, judgments, or divorcing spouse. This risk begins the moment they are added, not after your death, meaning your new joint owner's creditors could seize your accounts or property while you are still alive. (One exception is when property is jointly owned by spouses as tenants by the entirety. This ownership can protect the property from creditors trying to collect on just one of the spouse's debts.) 

3. Create and fund a revocable living trust. One common estate planning strategy, highly recommended by experts, is to establish a revocable living trust to avoid probate and its costs. When you set up a trust, you need to transfer ownership of all your accounts and property to the trust or designate the trust as the beneficiary. This process is known as trust funding. Assets owned by the trust or designated to the trust are not part of the probate estate and do not require court involvement. While you are alive, you stay in control of all decisions regarding the trust's assets as the trustee and enjoy the use of those assets as the current beneficiary. After your death or if you become unable to manage your affairs, your named successor trustee will step in to handle and distribute the trust's assets according to your instructions. A trust is most effective when it is properly created and funded by a qualified estate planning attorney.

We Have the Tools to Help You

The strategies above can help your loved ones avoid probate of your Estate, but if not done correctly, they can impact your Estate plan. If you're interested in creating a plan for yourself and your loved ones that keeps you out of probate court and saves you the related expenses, contact L. Theodore Hoppe, Jr., Esquire – Attorney at Law today to schedule an appointment. We'll discuss ways to avoid probate that align with your Estate plans. For your convenience, we can hold our meetings via video conference or phone if you prefer. We're here to help you determine if avoiding probate makes sense for your situation and to find the best way to do so.