Testators (those planning their estates) may have a variety of different personal goals. Some people want to create scholarship funds. Others want to help their loved ones achieve more comfortable standards of living.
One common goal frequently shared by testators is to limit what assets pass through the probate courts. They don’t want these assets disclosed to the public or vulnerable to liquidation to repay creditors.
There are many reasons to want to keep specific resources out of probate court and also a variety of ways to achieve that goal. The following are some of the common estate planning strategies used to keep certain assets out of probate court.
Adding a co-owner
The resources in the name of the deceased individual become the property of their estate. People can potentially prevent assets from becoming part of an estate by taking on a co-owner for those assets during their lifetime. Resources ranging from real estate and vehicles to financial accounts and businesses can have other people named as secondary owners. Such strategies can keep assets out of probate court and ensure that they transfer directly to a specific person who acts as the co-owner during the lifetime of the testator.
Arranging for a direct transfer
For those with financial resources, taking on a co-owner may not be the best financial choice. A co-owner could theoretically waste jointly-owned assets. Preserving sole ownership may be necessary for an individual’s financial stability and peace of mind. That being said, it is possible to bypass probate court by arranging for financial resources to transfer directly to specific people after the death of the main account holder.
Adding payable on death or transfer on death designations to investment accounts, checking accounts and retirement accounts can allow a specific beneficiary to assume control of financial resources when the account holder dies. They must typically appear in person with both government-issued identification and a copy of the death certificate but can gain control over financial resources without waiting for probate proceedings.
Using assets to fund a trust
Testators in a variety of situations may decide to create trusts. They may want to leave resources for a beneficiary with special needs or a history of financial challenges. They may worry about qualifying for Medicaid for long-term care or paying estate taxes if they have particularly valuable resources. The assets used to fund a trust belong to the trust and do not pass through probate court in most cases. Therefore, the establishment of a trust can be a useful step for those who want to keep specific assets out of probate court.
Discussing legacy wishes and personal assets with a skilled legal team can help people establish estate plans that achieve their goals. A testator who wants to keep property out of probate court may need to use an assortment of tactics to minimize what passes through court after their passing.