#003: Strategies for Avoiding Probate

In my last post, I said that in order to avoid probate, the decedent could not own any assets in his or her personal name. In terms of avoiding probate, it is helpful to think in terms of non-probate assets and probate assets"No" to Probate!

“Non-Probate” Assets. These are assets that, by definition, do not go to probate because they automatically transfer to the intended beneficiary or successor owner on death. Common examples include life insurance policies, annuities, IRAs, pensions, and the like. The decedent names one or more beneficiaries while living, and on death, the company simply transfers the asset to the beneficiaries upon receipt of a death certificate. Another common type of non-probate asset is property or accounts that are owned jointly, in such a way that on death, the joint owner takes title to the asset by operation of law, without a court order or process. Examples would include bank accounts or real property owned as joint tenants with right of survivorship; or as “husband and wife,” which in the law we call tenancy by the entireties.

“Probate” Assets. These are assets that, unless the decedent does something while living to deal with their disposition on death, will otherwise be required to go through probate. Examples would include a single person’s residence (including a widow after her husband’s death), or a bank account or investment account only in the decedent’s name. There are strategies to make such probate assets “non-probate.” For example, the single owner of real estate may execute and record what is called an Enhanced Life Estate Deed, also known as a “Lady Bird” Deed (named after “Lady Bird” Johnson). Someone who has a bank account or investment account in her own name can sign a “transfer on death” document with the institution, which will cause the funds to transfer to the named recipients on death without probate.

So with careful planning, one can avoid probate by evaluating all of one’s assets and making sure that upon death, there will be no “probate” assets by following certain strategies as outlined above. However, one of the most common techniques for avoiding probate is the Revocable Living Trust (“RLT”). Although certainly not appropriate for every situation, the RLT can be a good tool for avoiding probate, and it can have other advantages as well.

Trust Funding

With the RLT, the person planning his or her estate first creates the trust, then funds the trust with what would have been probate assets. Title to these assets is changed from the planner’s individual name to the trust. So, for example, if Jennifer Jones owned a vacation house in her personal name, she would sign and record a deed transferring the house from her personal name to “Jennifer Jones as Trustee of the Jennifer Jones Trust.” This is a simple example, and those who are wanting to avoid probate should carefully plan with an experienced estate planning attorney.


#002: What is Probate? Doesn’t a Will avoid Probate?

We sometimes have clients who come in saying something like, “I want to avoid probate. I need a Will.” Many people incorrectly assume that having a Will is what they need to avoid probate. That is simply not the case.

So what is probate? Probate is the court process of settling a deceased person’s estate. judge cartoon

It comes in two forms: intestate or testate. Intestate means that the decedent died without a Will. Therefore, state law determines what happens to the assets. Testate means that the decedent died with a Will, so that the court must follow the provisions of the person’s Last Will.

So what happens if one dies without a Will? The court follows what is called intestate succession.

If the decedent is married at death, all assets go to the surviving spouse, unless:

1. The decedent had lineal descendants not with the surviving spouse. In this case, 1/2 of the estate goes to the surviving spouse, and the other 1/2 to the decedent’s lineal descendants per stirpes (more on this term in a future episode). OR

2. The decedent had all of his or her lineal descendants with the surviving spouse, and the surviving spouse had lineal descendants not with the decedent. In this case, 1/2 of the estate goes to the surviving spouse, and the other 1/2 to the decedent’s lineal descendants per stirpes.

If the decedent is single at death, then the estate goes equally to the decedent’s lineal descendants. If there are no such descendants, then the estate goes to the decedent’s mother and father equally, or to their survivor if one has passed. If none of the above applies, then the assets are divided equally among the decedent’s brothers and sisters.

To summarize … in order to avoid intestate succession, where the State dictates what happens to your assets, you need a Will. So having a Will is a very good thing, but it does not avoid the court probate process.

So how does one avoid probate? The simple answer is this: you must own or control all of your assets in such a way that on your death, no asset is owned in your personal name, i.e., there are no probate assets.

There are many estate planning strategies for avoiding probate, and each person should discuss his or her situation with an estate planning lawyer. One of the major strategies is the Revocable Living Trust. We will go over this and several other probate avoidance strategies in our next episode.

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#001: What is a Will and why should I have one?

What is a Will and do you really need one? This may sound basic, but it is a fundamental question that all of us, as responsible adults, should answer in our own minds. A will is a written legal document that establishes a person’s testamentary intent. It communicates a person’s wishes after death regarding his possessions and people. The person making the will, whether male or female, is referred to as the testator.


Holographic will written on tractor fender – probated in Saskatchewan, Canada.

A “will” is also called a “last will” or a “last will and testament,” indicating this document is the current will or the one that is in effect, not any previous will the testator may have signed.

A basic will should contain at least 2 essential elements:

1.  Appointments of persons or entities who will carry out your intentions

2.  Testamentary plan of how your assets will be distributed

Appointments. The most important appointment in the will is the personal representative or executor. The title of this person is different depending on the State, and in Florida and many states, it is the personal representative. We frequently abbreviate this title to “PR” or “personal rep.” The personal rep. is assigned the duty of carrying out the plan set forth in the will. This means filing the will with the court, being appointed by the probate court, probating or carrying out the intent of the will, and then closing the estate. So, for example, if the will indicates that the testator wants $5,000 to go to her brother Billy Bob Jones, her personal rep. will write a check out of the Estate account for $5,000 payable to Billy Bob Jones.

If the testator has minor children and no spouse to care for the minor children after death, it is very important that he appoint a guardian of those minor children. This is very important because it prevents the court from stepping in and deciding who will care for the minor children. This would also apply to adults who are incapacitated and unable to take care of themselves.

If there is a testamentary trust in the will, the the testator will also name a trustee in the will, but more on that in a future episode.

Testamentary Plan. This is the second essential element of a basic will, and consists of the testator indicating what happens to her assets after death. So, for example, in the case of a husband and wife with 3 children, they would typically leave everything to each other in their respective wills, and if their spouse predeceased them, everything equally to their 3 children. This is a very simple and basic example. Every planning situation is unique. The testators should discuss their wishes in detail with their attorney before making a decision on the final plan.

That’s basically what a Will is. So why have one? Everyone should have a will so that the State laws of intestacy don’t step in and dictate who gets what. This is not “avoiding probate.” This is avoiding intestate succession. What’s that, you ask? Well check out our next episode to learn what probate is all about.

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