If you hold property jointly with another person, depending on how the property is titled, it should automatically pass to that individual after your death. This would include bank accounts titled as joint owners with right of survivorship or real estate owned jointly or as tenants in common. Although jointly-owned property passes automatically, if co-owners die simultaneously, such as spouses in an accident, that asset may be subject to probate if not held in a trust.
The most common type of living trust, the revocable living trust, may be changed or terminated at any time by the individual creating it, known as the grantor. Assets placed in the trust, such as a house, stocks and bonds or bank accounts, belong to the trust and must be re-titled as such. However, by naming yourself as trustee, you have the benefit of these assets during your lifetime. The trust also names beneficiaries who receive the assets after your death. Proceeds from the trust during your lifetime are reported on your personal income tax return. You can have your attorney draft a trust agreement or use a trust kit from an online document provider.
Joint Living Trusts
Rather than creating individual trusts, spouses may create joint living trusts, with both husband and wife acting as grantors and trustees. Both jointly and individually-owned assets may be placed in such trusts. Each person may revoke the trust during his or her lifetime. If either person revokes, any property in the trust goes back to the way it was titled before being placed in the trust.
Other Exceptions to Probate
For many people, a major reason for establishing a living trust is to avoid property going through the probate process after their death. However, property going through probate is generally titled solely in the decedent's name. You may also arrange for transfer-on-death provisions for beneficiaries for brokerage and mutual fund accounts or stock shares, or payable-on-death provisions for bank accounts. These assets then pass directly to the beneficiaries, bypassing probate. Certain assets, such as IRAs, 401(k)s and life insurance policies, do not go through probate, as you name the beneficiaries for these instruments.