Will Substitutes to Avoid Probate
Before considering how to avoid probate, one should take careful consideration thinking through whether avoiding it is right for them. This topic is also discussed in this video.
If you are interested in avoiding probate there are three common options to consider:
You can name one or several beneficiaries to your accounts. This is frequently done with life insurance and retirement accounts, but it can also be done with other accounts, such as bank accounts. For any of these accounts, you can effectively name a beneficiary by identifying the individual as P.O.D., or “Payable On Death.” “I.T.F.,” or “In Trust For.” “In Trust For,” and “T.O.D.” or “Transfer On Death.” All of these titles mean the same thing: that a beneficiary has been named, and assets in that account at your death will pass to the named beneficiaries This is a very easy way of making sure that those assets are not managed under your probate estate. When naming individual beneficiaries, you should always consider whether or not they should be added on a “per stirpes” basis (see our blog post HERE on this subject)
Alternatively, you can identify someone as a joint owner on an account or asset. Unlike naming an individual as a beneficiary, this allows them access and rights to that asset while you are alive, but it also means that upon your death the entire asset will transfer to the other surviving owner(s) you have identified. It is important, when adding a joint owner, that you don’t name them as a “tenants in common” owner, and instead name them “joint tenants with right of survivorship” if you want the assets to pass to the other joint owner(s) at your death. Those considering identifying someone as a joint owner must be aware that joint owners do have access to your asset while you are alive, as do their creditors. While it is tempting to, for instance, add your children as joint owners to your real estate while you’re alive, it does mean that – should a child go through a divorce, or have a judgement against them for any reason – the things that you thought of as your assets might be considered by their creditors to be theirs. For this reason, joint ownership is not something we necessarily recommend as a way of avoiding probate. See our related post: Potential Implications in Adding Someone to a Deed.
A third common way to avoid probate is to put assets in a trust. This is the most complex way to avoid probate, but can be useful for real estate and is an amazing estate planning tool if you are looking to pass on assets with “strings attached.”
The big question is: is avoiding probate worth it?
Probate is often thought of as something intimidating and unattractive to the client, but its process varies state to state.
In many states, probate is time consuming and expensive, but in Pennsylvania it is not terribly inconvenient; financially or timewise.
Many clients who have spent a sizable amount of time and energy to avoid probate find that it would’ve taken possibly less time and energy not to avoid it at all.
If even one asset is missed when trying to avoid probate, then the probate process will still be required.
It is easy to circumvent probate for only some of your assets; for instance, by adding beneficiary designations to your cash, brokerage, and retirement accounts, while your real estate, (which in Pennsylvania can’t simply get beneficiaries added to the Deed,) cannot simply have beneficiaries added to the Deed. In this circumstance, on the occasion of your death, the person who’s managing your real estate won’t have the required cash or easily liquidated asset to manage the real estate they are in charge of, which can be problematic.
It’s best to think hard about whether or not you want to avoid probate before using these methods to avoid it.