TRANSFER OF ASSETS WITHOUT PROBATE
People often ask, is probate really necessary? The answer is: not always.
Probate is only necessary when you own assets solely in your own name at the time of your death. For example, probate is usually required to change title to real estate, financial accounts, and other formally-titled assets.
- Jointly Titled Assets
However, if your assets are owned jointly with another person (such as a spouse), the other person automatically owns those assets when you die. For example, if you have joint bank accounts, those bank accounts automatically become the property of your co-owner as soon as you die. Or, if you own real estate with another person and the title includes a right of survivorship, then the title transfers upon your death, without the need for probate proceedings.
Many financial accounts are controlled by beneficiary designations and do not require probate. These accounts include:
- Bank accounts and brokerage accounts that have a valid transfer-on-death (TOD) or payable-on-death (POD) designation
- Life insurance policies
- Tax-favored retirement accounts, such as IRAs and 401(k)s
- 529 college savings accounts.
However, if you fail to designate a beneficiary on these accounts, or if you make your “estate” the beneficiary of the account, then probate might be required. As a result, careful consideration of beneficiary designations is critical.
Finally, many people use estate planning tools called “trusts” to avoid probate. When you set up a trust, you transfer legal ownership of your assets to the trust. As a result, when you die, you technically do not own any assets and there is no need for probate proceedings.
To summarize, probate proceedings could be avoided if all of your assets are jointly titled or have valid beneficiary designations, or if you change title to your assets, such as through the use of a trust.
However, even if you take these steps, probate might still be necessary in certain circumstances, such to collect debts owed to you at your death, to settle disputes between your heirs about who is entitled to your assets, or to resolve any disputes about the validity of your Will.
If you would like more information about circumstances that may not require probate proceedings, please feel free to contact me for a consultation.