There is hardly a week that goes by that I don’t receive a call from a potential client asking me to help them “avoid probate”. Unfortunately, most of the time, the client only has a vague understanding of the probate process, and no compelling reason to try to avoid it (more about the probate process can be found here.) While each individual’s estate planning situation should be discussed with their attorney, there are situations in which avoiding probate is highly advisable. In this article, we will discuss a few ways that New York estate planning attorneys help their clients avoid probate. For more specific legal advice, we urge you to speak with an estate planning attorney.
Name a Beneficiary on Your Accounts
Almost all brokerage, retirement, and bank accounts as well as life insurance policies let you specify who you want to inherit your accounts when you pass away. They do this by allowing your accounts to be POD (payable-on-death) or TOD (transferable-on-death) to a beneficiary or beneficiaries that you list. You can select beneficiaries by filling out the beneficiary forms and submitting them to the institution. You can also specify alternate beneficiaries in case the original beneficiaries predecease you. After your pass away, your named beneficiary has to bring in his identification and proof of death to collect the proceeds; all without a Surrogate’s Court proceeding. If the beneficiary form is not filled out, or if all the listed beneficiaries predecease you, the bank will require a probate or estate administration proceeding before they release the funds to the estate.
Own Assets as Joints Tenants With Rights of Survivorship
As discussed in a prior article on joint ownership, if you own property with someone else as joints tenants with rights of survivorship (JTWROS), or as tenants by the entirety (TBE), the property will automatically pass to the other owner(s) when you die. Fortunately, many assets, including bank accounts, investment accounts, and real property can be held as JTWROS or TBE, which allows you to avoid probate upon your death. It is important that the ownership papers such as deeds, be properly filled out. I have seen many instances in which people assumed that assets were owned at JTWROS, but were really owned as tenants in common, and did not pass automatically upon death.
Create a Revocable Living Trust
A revocable living trust is an agreement that you sign which allows you to manage your property while you are alive, and lets you select someone else to manage it when you pass away, and therefore avoids probate when you die. When you, as the “grantor”, create a trust and transfer assets into it, the trustee of the trust (which is initially also you) becomes the legal owner. When one trustee passes away, a successor trustee takes over management and control of the assets in the trust, according to the instructions the grantor set up. Therefore, although assets in the name of the decedent alone do go through probate, assets which are in trust don’t since the ownership didn’t end; it simply changed to another individual. Revocable trusts also allow you to plan for incapacity by letting someone else manage your assets if you are incapable of doing so yourself.
Another way of avoiding probate is gifting away your assets while you are still alive. This is generally not recommended since it leaves the client at the mercy of the beneficiaries, who are generally not under the obligation to return the gift. There are also significant tax and long term care consequences which go along with gifting away assets during life. It is important to speak with an estate planning attorney before gifting away any assets.
As always, we invite you to contact our office for a free phone consultation at 347-766-2685 to discuss your particular situation with a New York estate planning lawyer