Probate is the legal process through which a person’s estate may be administered after death. Depending on local law and the size and structure of the estate, probate can involve validating a will, identifying assets, paying debts and taxes, and distributing remaining property to beneficiaries.
For some families, avoiding or minimizing probate can make estate administration simpler, faster, and potentially less expensive. However, probate rules vary significantly by jurisdiction, and not every estate needs to avoid probate. The best strategy depends on the person’s assets, family situation, and local laws.
Understand Which Assets Go Through Probate
The first step is understanding how property is normally transferred after death.
Assets owned solely in the deceased person’s name without a designated beneficiary are more likely to require probate. Examples can include certain bank accounts, investment accounts, vehicles, and real estate.
Other assets may pass outside probate because they already have a legal mechanism for transferring ownership.
Jointly owned property may pass automatically to a surviving owner when the ownership arrangement provides for survivorship. Similarly, certain financial accounts allow an account holder to name beneficiaries who receive the assets after death.
Life insurance policies and retirement accounts commonly use beneficiary designations. When the designation is valid and properly maintained, the proceeds may pass directly to the named beneficiary rather than becoming part of the probate estate.
Because these rules vary, simply assuming that an asset avoids probate can be risky.
Use Beneficiary Designations Carefully
Beneficiary designations can be one of the simplest ways to keep certain assets outside probate.
A person may be able to designate beneficiaries for life insurance, retirement accounts, investment accounts, and certain bank accounts.
The designation should be reviewed after major life events such as marriage, divorce, the birth of a child, or the death of a beneficiary.
An outdated beneficiary form can produce an outcome that differs significantly from what the account owner intended.
It is also important to distinguish between primary and contingent beneficiaries. A contingent beneficiary can receive the asset if the primary beneficiary cannot.
Parents should be especially careful when naming minor children directly. Depending on local law, transferring assets directly to a minor can create administrative complications. A trust or another appropriate arrangement may sometimes be more suitable.
Consider Joint Ownership
Joint ownership can sometimes allow property to pass directly to another owner after death.
This can be useful for certain homes, bank accounts, or other assets, depending on how ownership is structured.
However, adding someone as a joint owner should not be treated as a universal probate-avoidance solution.
Joint ownership can affect control of the property while the original owner is alive. The other owner may acquire legal rights to the asset, and creditors, relationship problems, tax consequences, or disputes can create unexpected complications.
Before changing ownership of a valuable asset, it is worth understanding the legal and financial consequences.
Consider a Living Trust
A revocable living trust is another commonly used estate-planning tool.
The person creating the trust can generally place assets into the trust during their lifetime and specify how those assets should be managed and distributed after death.
When assets are properly transferred to the trust, they may be distributed according to the trust’s terms without going through the same probate process that would apply to individually owned assets.
A trust can also provide additional flexibility. For example, the trust can establish instructions for managing property if the person becomes unable to manage their own affairs.
However, creating a trust is not enough by itself.
Assets generally need to be properly transferred or otherwise connected to the trust according to applicable law. An improperly funded trust may not accomplish the intended probate-avoidance goal.
Trusts can also involve legal and administrative costs, so they are not necessarily necessary for every estate.
Use a Will Even If You Want to Avoid Probate
Trying to avoid probate does not mean a person should avoid creating a will.
A will can provide instructions for assets that do eventually pass through probate and can identify beneficiaries and other important wishes.
For parents, a will can also be an important part of naming preferred guardians for minor children, subject to the applicable legal process.
A will does not normally prevent probate. Instead, it provides instructions for the probate process when probate is required.
Estate planning therefore often involves using several documents and ownership arrangements together rather than relying on one method.
Keep Estate Documents Organized
A well-organized estate can be easier for surviving family members to administer.
Important documents can include wills, trust documents, property records, insurance policies, retirement information, financial account details, and beneficiary information.
The person responsible for handling the estate should know where these documents can be found.
It is also useful to review the estate plan periodically. Changes in property ownership, family relationships, financial circumstances, and local law can make an older plan unsuitable.
Avoiding probate should not become the only objective.
A strategy that technically avoids probate but creates tax problems, family disputes, ownership complications, or difficulty managing assets during life may not be a good estate plan.
The goal should instead be to create an efficient transfer of assets that reflects the person’s wishes while protecting beneficiaries and making administration as straightforward as reasonably possible.
Common approaches include beneficiary designations, appropriate joint ownership, payable-on-death or transfer-on-death arrangements where available, and properly established trusts. A will remains important for assets that do require probate and for other estate-planning purposes.
Because probate and estate laws differ substantially between jurisdictions, anyone with significant assets, real estate in multiple locations, a blended family, minor beneficiaries, or complicated financial arrangements should consider speaking with a qualified local estate-planning professional.
With careful planning, many families can reduce the amount of property that has to pass through probate and make the administration of an estate considerably more manageable.