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Estate Planning Alert: Probate Avoidance Alternatives

5/2/14

Avoiding probate generally is desirable to reduce attorney fees and maintain privacy. However, you must carefully consider how best to do so.

Essentially every type of asset can be separately arranged to avoid probate. Most assets can be titled "joint and survivor," in which case the assets pass to the survivor outside of probate. However, while such titling may be beneficial between spouses, it can present serious problems when used between a parent and a child. Life insurance policies, retirement plans, and annuities pass to the designated beneficiaries outside of probate. Ohio real estate can be transferred to a designated beneficiary or beneficiaries at death outside of probate by recording a Transfer on Death Affidavit. POD (payable on death) designations for bank accounts and TOD (transfer on death) designations for securities, and (in Ohio) TOD designations for motor vehicles and watercraft, can accomplish the same purpose.

However, except in relatively simple situations, a self-trusteed revocable trust is generally the best way to assure that the entire estate will be distributed outside of probate according to your wishes, regardless of any deaths of beneficiaries prior to yours. Probate is avoided by having assets either owned by the trust or payable to a trust under a beneficiary designation or a POD or TOD designation. A trust also centralizes management of assets and payment of expenses until illiquid assets, such as the family residence, can be sold.

You need to carefully consider how best to avoid probate while assuring that all your planning objectives for your estate will be accomplished, regardless of intervening circumstances. Should you have any questions regarding probate avoidance, please contact one of our estate planning attorneys.

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