Methods to Avoid Probate
Probate is a cumbersome legal process by which a loved one’s belongings are distributed. For more information on what a probate is and the different types thereof, see our What is Probate article. In an effort to avoid all of the legal fees, attorney time, and various costs (both in terms of time and money) this article provides various methods to avoiding probate in its entirety. Most estates will require some collection or mixture of the following methods. For a free consultation, please give us a call or email at the contact information below.
(1) Transfer on Death Deeds
On November 1, 2008, the Nontestamentary Transfer of Property Act went into effect. Simply put, it allows Oklahomans to transfer property through a special deed called a Transfer-on-death-deed or TODD. This deed is completely revocable and does not actually go into effect until the death of the grantor. The grantee, or the ones receiving the property, MUST FILE AN AFFIDAVIT shortly after the death of the grantor. Failure to do so will result in probate and all the efforts of a TODD will be for not.
Interesting history fact, prior to November 1, 2008, individuals would pre-sign deeds to their children and place the deeds in their dressers. These are called dresser deeds, but with the advent of TODDs, these are no longer viable as an estate planning strategy.
(2) Trusts
Trusts are interesting beasts to be sure. A quality attorney can do just about anything a client wants with a trust. This flexibility has made trusts common and popular estate planning tools. The basic premise is to divide legal and equitable title between the trust and a beneficiary. Once the trust is created, that trust is a completely different entity from whomever created it. Therefore, anything held by the trust does not have to go through probate. Only things owned by an individual person go through probate. After the trust creator’s death, all assets of the trust follow whatever provisions that trust sets forth. For more information on trusts, see our full article on them. For now, some potential uses of trusts include:
(a) Spend-thrift — These are designed for asset protection and can help avoid creditors. Unfortunately, not all is golden with a spend-thrift trust and there are a few limitations: (1) any assets placed in the trusts are subject to claims for child/spousal support, (2) any assets exceeding $25,000 are subject to garnishment by creditors, and (3) the interest of beneficiaries to the income of the trust cannot be voluntary or involuntarily conveyed. Spend-thrift trusts are very difficult to establish, so be sure to acquire legal representation to ensure a spend-thrift trusts is properly established.
(b) Charitable Purpose Trusts — What these trusts do resides in their name. A Charitable Purpose trust can be established for a single cause, multiple causes, or an ideal. These trust can ensure that your intentions are taken into account even past your death. These trusts provide more security and control than a simple gift left in your will.
(d) Special Needs Trust — This type of trust can be utilized to ensure the continued benefits of certain government programs (even if your income or assets increase). For example, an influx of wealth can make one ineligible for medicaid, supplementary security income, or certain veteran’s aid. However, this type of trust can combat that outcome. These trust can also provide for individuals who are incapacitated or unable to manage money/property themselves.
(e) Totten Trusts — while not a trust in the traditional sense, these types of agreements occur between an individual and their bank. Similar to a pay upon death, you deposit funds into a bank account. Upon death, the bank then distributes those funds (and any interest) to a beneficiary.
(3) Joint Tenancy
Joint tenancy is easily the most common method for avoiding probate. Joint tenancy with rights of survivorship is a method of ownership (like fee simple, tenancy in common, etc.). If you own your property in joint tenancy, your deed will have words similar to: “A & B, a married couple as joint tenants with rights of survivorship, the whole to vest in the survivor.” While the whole phrase does not need to be present as recent law suggests “as joint tenants with the rights of survivorship” fulfils the basic necessities.
Its interesting to note that you also do not have to be married to own in joint tenancy. The only requirements of joint tenancy are unity of time, title, interest, and possession. Essentially, you have to acquire the property from the same deed (time and title). Yes, you can even deed to yourself; although that was not always the case. Further, you have to own the property in equal, undivided shares (interest and possession). Once one joint tenancy party dies, ownership of the property vests in the survivor. Therefore, you have be to aware of the ramifications of this. For example, if you are not married and pre-decease the other joint tenants, the property will be distributed to the other parties and their decedents only. Therefore, joint tenancy is not always the correct method for avoiding probate. If you have questions about joint tenancy, give us a call. We would be happy to discuss the intricacies with you.
A Final Word of Warning
Determining which type of estate plan you need is difficult enough. Some might be great for your situation, but some might be harmful to your intentions. If you are interested in planning your estate, please give us a call at the contact information below. We offer free consultations and we will do everything in our power to make the most effective estate plan for your situation. We also offer concierge services if you would prefer to plan your estate in the comfort of your own home.