How to Protect Your Assets From Probate

By Jeffry Olson, J.D.

How to Protect Your Assets From Probate

By Jeffry Olson, J.D.

When individuals consider estate planning, a common goal is keeping heirs out of court. In legal terms, this means avoiding probate. Clients often mistakenly believe a will allows their heirs to avoid probate, when in fact it guarantees heirs will end up in court. However, a number of options exist to protect assets from probate.

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1. Co-own marital assets.

When spouses co-own their assets, the surviving spouse generally receives the property without the need to go through probate. These assets often include bank accounts, motor vehicles, and other property that names spouses as co-owners. Be advised, property held in the name of only one spouse typically goes through probate. Consider this prior to the death of a spouse, and make sure both spouses hold all assets.

2. Transfer funds to payable-on-death accounts.

Payable-on-death accounts function just like other bank accounts. In life, an individual who holds one is the only person who has access to the account. However, the owner of a payable-on-death account names a beneficiary for the funds. When the account owner dies, the beneficiary receives the account. Unlike a co-owned asset, the beneficiary has no ownership of the account until the death of the account owner. On the owner's death, the beneficiary goes to the bank with proof of identity and proof of death of the account owner. The beneficiary then has ownership of the account without the need to go through the probate process.

3. Own property as joint tenants with rights of survivorship.

A common method to avoid probate is owning property as joint tenants with rights of survivorship. When all but one of the owners die, the remaining owner becomes the sole owner of the property. This type of ownership, most common in real estate, might apply to a marital home. In that case, when one spouse dies, the owner of the marital home held in joint tenancy with rights of survivorship becomes the sole owner. This type of ownership allows the property to pass without the need for probate.

4. Create a living trust.

Using a living trust is another way to avoid probate. In this situation, the original property owner is usually the grantor, beneficiary, and trustee of the trust. The grantor names the desired heir of the property as successor trustee and beneficiary of the trust, allowing the heir to take over the trust upon the death of the original owner.

To create a trust, the grantor drafts a trust agreement naming the parties to the trust. They then transfer assets to the trust, naming the the trust as owner and the original owner as trustee. The trust agreement provides the terms for distributing and managing the trust.

While the original trustee is alive, they are in control of the trust. They can freely add to or transfer assets from the living trust. When the trustee dies, the successor trustee takes over the trust without the need to go through the probate process.

Creation of the trust with the intent to place property in the trust is not sufficient. The creator must properly transfer their assets to the trust with appropriate deeds or other paperwork. A common mistake is creating the living trust and failing to transfer assets to the trust. Avoid this mistake, or the trust is merely a worthless piece of paper.

Probate is an expensive, time-consuming process. However, with proper planning and action, your heirs can avoid probate and inherit your property smoothly and easily.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.