How to Avoid Probate: Six Ways

I've included Six Ways to Avoid Probate (5 of which are free!) below. The information that follows shall not be construed as legal or tax advice. It is for educational and informational purposes only. If reducing or eliminating estate taxes is one objective, please consider enlisting the talents of an attorney, competent in estate planning. Please consult with your professional advisors before making any changes regarding your estate plan. Now that MY attorneys are happy, let's continue.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• a list of your assets and how title is held (jointly, sole owner, etc.)

1. No cost to establish. Assets owned jointly, as Joint Tenants With Rights of Survivorship (JTWROS) avoid probate as the property passes automatically to the surviving owner by "operation of law" at the first owner's death. The decedent's Will is ignored. It's worth noting that probate avoidance will only occur at the first death, unless the surviving owner re-titles the assets with another person. Speak with a professional before establishing a joint account where non-spouses are involved.

2. No cost. Accounts or contracts with designated beneficiaries like IRAs and other retirement plans, annuities, and life insurance avoid probate as the proceeds are distributed to the designated beneficiaries listed on the account. Your Will is ignored.

3. No cost to establish. Title your bank account as a Payable on Death (POD) account or ITF (in trust for) account and the account balance will be paid to your named beneficiaries, without probate, at your death. Your Will is ignored.

4. No cost to establish. Investment accounts titled as Transfer on Death (TOD) accounts will be transferred to your designated beneficiaries, without probate, at your death. Again, your Will is ignored. As of this writing, 49 states recognize TOD accounts; all but Louisiana.

5. Cost involved. Have an attorney draft and execute a Living Trust, transfer your assets to the trust, and those assets so transferred and titled to the trust will be distributed to the trust's beneficiaries without probate. Costs can range, on average, from $1,000 to $3,000, depending on the complexity of the prepared documents.

6. Finally, gifting assets avoids probate. Under current law, you may gift up to $12,000 per year ($13,000 after December 31, 2008), to an unlimited number of recipients, with no gift tax implications. This amount is expected to be indexed for inflation each year, rounded down to the next highest $1,000.

Tips & Warnings

• What is probate, anyway? Probate is the legal process of administering a decedent's estate. What is a Will? Drafted properly, a Will is a written document disposing of a decedent's probate assets.
• While experience may be the best teacher, often times, it's also the most expensive. Speak with a competent, estate-planning professional before attempting a do-it-yourself estate plan.

[flytiger]

on 8/16/2008 But in substantial estates -- those over $3 Million in joint assets -- a Will is critical to avoid substantial US estate (or death) taxes. Invest in a Will. Pay the lawyer. Your heirs will be so thankful you did.

Avoiding probate should not be the primary goal. Seeing that your property is transferred to whom you want is. Probate protects the deads' wishes.