Probate

Avoid Probate Court

Learn why you may want to avoid probate court and how to accomplish this goal.

Many people want to avoid probate court for a variety of reasons: they want to have more control over their own estate and how it is distributed after their death, and they may want to save their family the money, time and hassle that is involved in going to probate court.

There are a few ways to avoid probate court, and below is a list of ways that can help you accomplish this feat. You will also find information regarding ways to avoid probate court even when you have a situation that you may believe is too complicated to be able to avoid it.

What are the different ways to avoid probate court?

You can have a trust own your assets, or designate beneficiaries for the assets for which the asset holder, like as a bank, savings and loan, or brokerage firm, permits such a designation, or hold the asset jointly with another person in a form that gives the whole asset automatically to the survivor of all those listed as joint owners

Can probate be avoided by holding my assets in joint tenancy?

Yes, probate only deals with assets no longer owned by a living person or existing legal entity, such as a corporation or trust.

How do assets avoid going through probate court with a living trust?

Probate is for assets no longer owned by a living being or entity. Your trust will live as an entity long after you pass away and the trust owns your assets, so there is no need for probate for the purpose of determining who now owns your assets.

Sole Proprietorships

People in business for themselves need to make sure their lawyers help them set up ways to transfer the proceeds from their business to the trust when they die. Financial institutions will not move accounts under company names to trusts. What many attorneys recommend is that a self-employed person make the account payable on death (POD) to the trust.

If your sole proprietorship has assets, like vehicles or inventory, ask your attorney to determine the best method for your family to dispose of this asset. Most of the time these assets can be handled through your department of motor vehicles or by creating an assignment form.

If you know your family will either sell or divest your business, have your attorney draw up a Bill of Sale/Letter of Transfer. This document describes the business, and its assets or inventory. This document provides your family a snapshot of your business so they can place an appropriate value on the company and its assets.

Corporations

If you are a majority shareholder in a corporation, you should work with the lawyer that created the corporation to re-issue the stock in the name of your living trust. This gives your trustee control of your shares after your death. They have the flexibility to continue to do business, sell the corporation or divest the assets.

Partnerships

Typically partnership agreements need to be re-issued assigning ownership into the trust’s name. This will probably not affect the agreement between you or your partner, but just to be sure, make sure you check the agreement with your attorney.

Copyrights, Patents and Royalties

You need to work with your patent attorney to cover all the bases when you receive income from patents, royalties or copyright agreements. Your attorney can draft an assignment document to transfer these funds to your trust based on the contracts you have with debtors. Your attorney also needs to inform the debtors about changing their payables to the name of your family trust.

Oil and Gas Interests

Many families own pieces of oil and gas rights, and these assets should be transferred to your living trust. Work with your attorney to create the transfer deeds necessary to do this. This transfer warrants a trip to the title company to determine what forms you need to file and what entity keeps the deeds for oil and gas rights in your state. If everything is filed properly, your quarterly or annual distribution reports will include the name of your trust.

Time Shares

Families often don’t think about time shares when they are listing their assets to fund a living trust. Time-share agreements, which give their owners rights to a particular vacation property for several weeks each year, are considered property and should be included in your living trust.

These would be handled like any other out-of-state property. You’ll require a deed to re-title the time share into your living trust and send to the county recorders office.

Assets with Named Beneficiaries

There are decisions to be made about your assets that have named beneficiaries. These assets, which include life insurance, annuities and some retirement plans, are automatically paid out to the beneficiaries when you die—probate of these assets is typically not necessary.

IRAs, 401(k), 403(b), pension funds, profit-sharing, Keogh and other tax deferred plans

Taxed-deferred plans are also legally a trust. One trust can’t own another trust, so these assets cannot be transferred to your living trust while you are alive. Your living trust can be the beneficiary of these funds, but because you don’t pay taxes on these accounts until they are distributed, you most likely will want to choose a living family member as beneficiary.

There are many ways to avoid probate court, regardless of your financial situation or status. Transfer all of your assets in some way or another, and consult with an estate planning attorney to make sure you didn’t leave anything out of your living trust. This way, you can rest assured that you have managed to save your family a lot of money and time after your death by avoiding probate court.