Many people have heard horror stories about the probate process. Maybe they have heard probate is costly, or maybe it took a very long time for 
a friend or family member to go through the probate process for a loved one. Due to these issues and stories, it is common for estate planning attorneys to be asked, how do I avoid probate? While the probate process may be different in different states, many people do wish to avoid probate and there are ways to avoid probate. The article below has been drafted by a Denver estate planning attorney and discusses how probate may be avoided or how assets may avoid probate.
There are several methods to titling property that may avoid or bypass the probate process. Assets that do not go through the probate process are referred to as non-testamentary assets or non-probate assets. Certain methods may act more as a deferral than a true avoidance.
Assets Held in Trust
Many people use a revocable living trust to avoid probate. A revocable living trust can hold title to property for the benefit of an individual. Because title is held in the name of the trustee and a beneficiary is named for the property, the property held in the revocable living trust is not part of the probate estate. The trust document will direct the trustee regarding the distribution of the trust property at death. A revocable living trust also provides some privacy as it does not become public record. However, you must be very diligent at titling the assets under the trust or they may become probate assets. Further, there is a misconception that a revocable living trust provides asset protection. This is false and incorrect. A revocable living trust does not provide asset protection.
Assets with Beneficiary Designations
Employer sponsored retirement accounts, individual retirement accounts, life insurance death benefits and annuities pass directly to the beneficiary named by the account or policy owner because they are considered contractual obligations to pay out a death benefit.
Assets with Payable on Death (POD) Designations
Any money in a POD account will pass directly to the named beneficiary upon the account holder’s death, but the account holder will retain exclusive rights to the account while they are alive.
Joint Tenancy with Right of Survivorship
This may be jointly held bank accounts or brokerage accounts with JTWROS designations placed on the account or real estate held by two or people as joint tenants. Property owned in joint tenancy with a right of survivorship automatically passes without probate to the surviving owner or owners when one owner dies. Unlike tenants in common, a joint tenant does not own a fractional share or interest, but instead, each owns 100% of the whole. Holding property in joint tenancy may work well when couples acquire assets such as real property, bank accounts, securities, vehicles or other property together and desire to “automatically” leave the property to the survivor. Joint tenancy also has its disadvantages, such as one tenant may not want the other to receive their interest; both tenants could die in a common accident; one tenant may wish to sell their interest; the avoidance of probate with joint tenancy exists only as long as there is a surviving tenant. Thus, there may come a time when there is only one tenant and the property is held in fee simple and thus probate would be required at their death without further action. This is an example of potential probate “deferral” without full avoidance; a jointly owned asset is subject to the judgment against every owner and may be lost in the bankruptcy of an owner.
Ultimately, how you wish to pass your assets is a personal decision. A Denver estate planning attorney or tax attorney at The McGuire Law Firm would welcome the opportunity to meet with you and discuss your estate questions, issues and options. All potential clients receive a free consultation with an attorney.
Contact The McGuire Law Firm to speak with a Denver estate planning attorney or tax attorney!
