The most surefire way to avoid probate is with a living trust, which is a legal entity created to own everything you own by transferring ownership of your assets to it. If it is a revocable trust, you can usually make changes to it or terminate it at any time. If you are the trustee, you maintain control over everything you own during your lifetime. At your death, assets held in your trust do not need to pass through probate because you didn't actually own them -- your trust did. However, the American Bar Association cautions that if you neglect to include everything you own -- such as something you acquired after you made the trust and forgot to transfer ownership of -- then a simple will is still necessary in order to transfer that forgotten item to your trust after your death -- and that will would have to pass through probate.
Property Held With Rights of Survivorship
Real estate held with your desired beneficiary as “joint tenants with rights of survivorship” bypasses probate. This means that the property passes directly and automatically to the surviving owner when one dies, so probate is not necessary. Since there are many ways to hold property, consult with an attorney if this is your intent in order to ensure you’re getting it right. For instance, anything you hold as “tenants in common” will not provide this same protection.
Retirement funds are contractual obligations and allow you to name a beneficiary directly. These include pensions and profit-sharing plans, 401k plans and IRAs. Life insurance policies are also contractual obligations. If you instruct the holder of the policy or plan that it should transfer to a designated heir at the time of your death, it will bypass probate. You can also usually stipulate that life insurance proceeds should transfer to your trust at the time of your death when they become payable.
Bank accounts can also be held jointly with a beneficiary with rights of survivorship, and would transfer directly to that person at the time of your death. However, there is a downside to this because the beneficiary also has full access to the money while you are alive, and can theoretically deplete the account if he so chooses. “Inc." magazine recommends payable-on-death accounts where you can name the beneficiary just as you would with a retirement account. Such an account would also bypass probate. As of November 2010, two states -- California and Missouri -- allow you to do this with motor vehicles, where you can name your beneficiary on the registration form.