Probate takes place when the owner of property dies and an asset must be transferred from the deceased to another person. Probate is a court procedure in which a Will is submitted, proved to be valid or invalid and administered according to state law. If a person dies without having executed a Will or Revocable Trust, the person’s assets are disposed of according to state law, which is applied and administered through court and the probate process. Expense and delay are the primary concerns people have with the probate process.
Use of a Revocable Trust will avoid probate on all assets owned by the trust. Use of a Will requires use of the probate process. If you have chosen to use a Will instead of a Revocable Trust, there are still ways you can avoid probate on your assets. Some of those include:
• Titling assets in joint tenancy. Probate is avoided if there is a surviving tenant because upon the death of one joint tenant, the surviving tenant remains the legal owner. Note that naming a child as joint tenant may not be a good idea because it will expose the asset to the claims of the child’s creditors. Unintended tax consequences from the gift may result as well.
• Beneficiary Deeds in Colorado can be used to transfer title to real estate after one’s death; the beneficiary deed is recorded, but only becomes effective upon death and can be revoked by the Grantor at any time during his or her life by recording a properly executed revocation.
• Using beneficiary designations on assets such as life insurance and retirement accounts. Note that if you name your estate the beneficiary, probate will be required to transfer ownership to the intended beneficiary.
• Pay on Death Accounts – request that your bank make your accounts payable on death to named beneficiaries.
• Transfer on Death Accounts – request that your stock broker or mutual fund manager set up your account as a Transfer on Death Account and indicate how you want the funds distributed upon your death.
• Give it away before you die.
The most important thing to remember is that Probate can not be avoided unless planning is done in advance. We help people with these issues often. Do not hesitate to call us for advice as you consider these matters.