Probate is the legal process of administering the estate of a deceased person. It involves proving in court that the deceased person’s will is valid, identifying and inventorying the deceased person’s property, paying debts and taxes and distributing the remaining assets to heirs or beneficiaries.
Families often want to avoid probate because it can be time-consuming, expensive and a matter of public record. However, the following tactics can provide ways for families to circumvent the probate process.
Creating of living trusts
Whenever a piece of property passes directly to another person by law, it can avoid probate. A living trust accomplishes this by allowing a person (the trustor) to transfer ownership of assets to the trust while still alive. Upon the trustor’s passing, these assets pass directly to the chosen beneficiaries.
A trust requires a person to draft a document that names the beneficiaries and a trustee to manage the trust. By changing titles and ownership of property, the trustor can transfer assets to the trust that will not need to go through probate.
Jointly owning assets with intended beneficiaries
A property owner can also title assets jointly with another person and ensure that the individual has rights of survivorship. Then, ownership automatically transfers to the surviving joint owner upon a person’s death. The property owner could also assign multiple joint owners.
Common forms of joint ownership include joint tenancy with the right of survivorship and tenancy by the entirety, which married couples can use. Families should be mindful of potential drawbacks with this strategy, such as loss of control over the asset and exposure to the joint owner’s creditors or legal issues.
Setting up payable-on-death accounts and transfer-on-death designations
With payable-on-death accounts, a person can designate beneficiaries who automatically inherit the account funds upon the account holder’s passing. Common types of POD accounts include bank accounts, certificates of deposit and retirement accounts.
Setting up a POD account involves contacting the financial institution and completing the necessary paperwork that specifies the chosen beneficiaries. As with other estate planning vehicles, account holders need to review and update beneficiary designations if their wishes change.
Transfer-on-death designations allow an individual to name beneficiaries who will automatically inherit specified assets. Similar to POD accounts, this requires drafting and regularly updating documents with the appropriate entity. While a person can use a TOD for stocks and bonds, the transfer of vehicles and real estate is no longer possible through this method in Massachusetts.
There is more than one way to get around having an estate go through probate in Massachusetts. By choosing the appropriate option, a family can avoid the stress and strain of that process.
