How to Avoid Probate

You’ve probably come here looking for resources on how to avoid probate. And I’m going to tell you how to do just that. But before I dive into the techniques that can be used to avoid probate, you need to understand the one principle behind every explanation of how to avoid probate.  Here it is:

Probate can only be avoided by arranging your assets so that there is nothing in your name that does not automatically pass to someone else at your death.

All the probate avoidance techniques that we will discuss depend on this one principle.  For example:

1. Joint tenancies avoid probate by automatically passing the asset to the surviving joint tenant at your death.
2. Life estates avoid probate by automatically passing the asset to the surviving remainderman at your death.
3. Beneficiary designations avoid probate by automatically passing the asset to the designated transfer-on-death or payable-on-death beneficiary at your death.
4. Living trusts avoid probate because you do not legally own the assets that are in the trust at your death.

The reason most people don’t avoid probate is that their assets are not arranged in this way.  Oftentimes this is for good reasons.  There are significant drawbacks to most of these techniques.  Most of them can result in unfavorable tax consequences, loss of control, or insufficient incapacity planning (the living trust being perhaps the one exception).  So most people end up dying with at least some assets in their name that do not move automatically to someone else at their death.  The probate process is the mechanism for moving those assets.

What is Probate?

Probate refers to the court-supervised process of winding up a person’s final affairs.  In the typical probate proceeding, a judge will recognize the validity of your Last Will and Testament and authorize your executor to collect your assets, pay your debts, and distribute the balance to the beneficiaries.  Probate is a court-supervised process and almost always requires the assistance of a probate attorney.

Why Would Someone Want to Avoid Probate?

So why would someone want to avoid probate?  There are several reasons, including:

1. Saving Money. Probate can be expensive, often costing thousands of dollars in legal fees.  Expenses tend to increase with the size and complexity of the estate
2. Minimizing Hassle. Probate is time-consuming.  Your executor must inventory estate assets, file accountings with the court, notify (and possibly negotiate with) creditors of the estate, open estate bank accounts, and transfer assets to your heirs. This can be quite a burden on the friend or family member who is handling the estate.
3. Avoiding Delay. Probate ties up your assets in court.  Courts are reluctant to allow assets to be transferred until the estate is closed.  At a minimum, the executor must wait until all creditors have had a chance to submit claims, a process which could take several months.  This delays the distribution of your assets to your heirs.
4. Protecting Privacy. Once a Last Will and Testament is filed with the court, it becomes a matter of public record.  Anyone who wishes can go to the courthouse and obtain a copy of your will.  Some people would prefer to keep the final disposition of their assets private.

Enter the Living Trust Marketers

Because of these drawbacks, many people want to know how to avoid probate. In response to this interest, a whole cottage industry of “estate planners” has arisen to aggressively market probate avoidance techniques to seniors.  To sell their product, these salesmen tend to over exaggerate the costs and perils of the typical estate proceeding.  Common high-pressure sales techniques include pointing to extreme circumstances that resulted in horrific cases, overstating the cost of attorneys’ fees and court costs, and using other shady tactics to scare people into buying prepackaged “estate plans.”

Probate avoidance scams (including living trust marketing) have become so commonplace that the attorney generals of many states are taking measures to shut down living trust marketers.  Many of these individuals are not licensed attorneys and do not have the skills to properly draft and fund a living trust.  Often the “living trust” that they peddle is nothing more than a generic form that they have purchased from a third party vendor.  Since these “estate plans” are not properly prepared, the estate often goes through probate in spite of the effort to avoid it.

And the client never knows because, by the time the plan is needed, the client is deceased.

Cutting Through the Probate Avoidance Hype

Before you ask how to avoid probate, be sure that it’s something you need to do.  There are definitely costs and risks associated with probate.  But here’s the truth: Probate avoidance is not for everyone.  To make an informed decision, you need accurate information.  Here are a few tidbits that the living trust marketers leave out:

1. Probate Avoidance Can Itself Be Expensive. For it to work effectively, a living trust must be carefully drafted and fully funded.  And this takes time.  Often the costs of drafting and funding the trust will rival the costs of probate.  You should speak to an attorney and get an estimate of the costs of each so that you can make an informed decision.
2. Probate Avoidance Can Itself Be a Hassle. Probate avoidance requires a careful examination of how each of your assets is titled.  At least some of your assets will need to be re-titled to work with your estate plan.  This requires some work on your end.  Of course, the work that you do now is work that the executor will not have to do later. But don’t look past the work required to establish the estate plan.    
3. The Delay May Not Hurt Your Heirs. Your heirs didn’t have your assets before you died, so you may decide that several extra months of waiting won’t hurt them. But since the length of the probate process varies from state to state, this is a decision you should discuss with your attorney.
4. Not Many People Care about Your Will. Although some people have legitimate privacy concerns, the fact is that many people do not care about what’s in your will.  Wills are filed in most courthouses every day and no one reads them but the judge, the attorney, and the heirs.

We recommend probate avoidance for many clients (particularly older clients with a stable asset profile).  But we don’t force it on anyone.  Whether you need to avoid probate (and, if so, how to avoid probate) depends on your specific situation.

Probate Avoidance Techniques

Exactly how to avoid probate will depend on your specific circumstances.  Popular tools include joint tenancies, beneficiary designations, and revocable (living) trusts.  For more information on how to avoid probate using these techniques, see the related articles below.

Related Resources on Probate Avoidance

How to Avoid Probate Using Joint Tenancies

How to Avoid Probate Using Payable-on-Death or Transfer-on-Death Designations

How to Avoid Probate Using Life Estates

How to Avoid Probate Using Revocable Living Trusts