Avoiding Probate

Probate is a court-supervised process used to validate your will and distribute your property. Many people want to avoid the costs and time associated with the probate process.

Methods to avoid probate include:

• Gifts

• Joint ownership

• Trusts

• Contracts

You can make nontaxable gifts up to $15,000 per person per year. This has the effect of reducing your federal tax liability. The gift must be irrevocable.

Assets owned with another person may have a “survivorship” provision that allows the survivor to be the sole owner upon the death of the other owner. To minimize taxes, the owners must be spouses or show that each contributed equally. In most jurisdictions, a written agreement is required.

A “Totten Trust” is a bank account opened in the name of the depositor in trust for a beneficiary. The depositor is the sole owner during his/her lifetime, and he/she may withdraw assets or change beneficiaries. The account is not included in the probate estate.

Similarly, a “living trust” allows an owner to transfer assets to a trust. Upon his/her death, the trust becomes irrevocable and the trust assets are administered and distributed in accordance with the provisions of the trust.

Finally, assets payable to a beneficiary by contract are not subject to probate. An example is the Servicemembers’ Group Life Insurance benefits.