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!

Testamentary assets are those assets that are part of an individual’s probate estate and are subject to the probate court process at death.  Sometimes these assets are also referred to as “probate” assets.  Examples of testamentary or probate assets are below.  Assets held in fee simple (100% individual ownership) whereby there is full and absolute ownership and no other owners with survivorship interests.  Thus, it could be a bank account, house, stock certificate whereby there is no payable on death designation or survivor interest.  Property held as tenants in common would be a testamentary asset.  Tenants in common could be defined as two or more people owning property without rights of survivorship.  Under this situation, each tenant’s ownership interest will become part of their probate estate and therefore distributed to the individuals designated in their will and last testament.  As a tenant in common, you absolutely own your percentage share in the property.  You may sell the interest during your lifetime or you can leave the interest to your chose beneficiaries upon your death.

As you may have inferred from the above information, there can be ways by which assets can avoid probate.  Some people do not care if their assets go through probate, while others feel strongly that their assets not pass through the probate process.  Many people think probate is costly, time consuming and troublesome for their loved ones.  It is possible to defer or avoid probate by titling assets, holding assets in trust, establishing beneficiary designations, establishing payable on death designations or holding property in joint tenancy with a right of survivorship.  Some of the above options work well in certain circumstances, but there can be potential disadvantages as well.  The options to avoid probate will be discussed in future articles.

Please contact The McGuire Law Firm to speak with a Denver estate planning attorney regarding your estate plan and related questions.  We offer all potential clients a free consultation and estate plans that are affordable and fit your needs.

A free consultation can be scheduled with a Denver estate planning attorney by contacting The McGuire Law Firm.

The legal definition of probate would be something like: the legal process of administering an estate of a deceased person, resolving all claims and distributing the deceased person’s cash, property and assets.  During a continuing legal education course, I heard an estate planning attorney define probate as, “a lawsuit filed against yourself that you end up paying for, in order to give away your money and property.”  I found this definition comical and in many ways true!

Each state may have somewhat of a different probate process and there are states that are UPC states and non-UPC states.  UPC stands for the Uniform Probate Code.  In Colorado, there are generally three “types” of probate situations.  You can have the small estate whereby the value of the estate is less than $50,000 and there is no real property.  Heirs can collect assets by using an affidavit and not opening probate action through a court.  You can have an uncontested estate, sometimes referred to as an informal estate.  This is generally allowed when there is a valid will or clear intestacy, no contests are expected and there is a qualified personal representative ready to be appointed.  Under this situation, the court has a limited role in the administration of the estate, but the court will still act to ensure the will or intestacy laws are followed.  Of course, you have the contested estates or the issue(s) of an invalid or questionable will.  This may be referred to as formal probate and is required when a will is being contested or the will is unclear and/or invalid.  The court may require that the personal representative obtain approval for every transaction regarding the transfer or disposition of property.  Given the circumstances, formal probate can take significantly longer than a small estate or informal probate.

Many people wish to avoid probate and many people do not seem to mind the thought of their estate (and family) going through the probate process.  There are several methods to titling property that can be used to “avoid” or “bypass” probate.  Assets avoiding probate are referred to as “non-testamentary” or “non-probate” assets.  In some circumstances, the methods may actually work more as a deferral of probate, than as a true avoidance of probate.

If you have questions regarding your estate, please feel free to contact a Denver estate planning attorney at The McGuire Law Firm.  All potential clients receive a free consultation to discuss your estate planning needs and other legal issues.

Schedule your free consultation with a Denver estate planning attorney by contacting The McGuire Law Firm.