Avoiding probate is desirable, especially when trying to save money, minimize hassle, avoid delay and protect the family’s privacy. These concerns, however, must be balanced with the value of having an independent executor to divide assets among family members. A fuller explanation of these factors is described in the article “why avoid probate?”
But once an individual has assessed her estate and decided it would be best for her assets to avoid probate, there are a number of options available. Below are the main instruments you need to know.
How to Avoid Probate with The Life Estate
A life estate is one of the easiest ways to avoid probate because of its simplicity in form. It is most commonly used in a deed for real estate. Other times, the device is used in a trust that may hold real estate and/or some amount of money. The typical life estate situation arises between a child and parents.
Mr. & Mrs. Arnold own a home and want to help their only child, a son, to avoid probating their estate. They create a revocable trust, that lists themselves as trustees, and also as lifetime beneficiaries. Also within the trust are provisions that list the Arnolds’ son as a remainder beneficiary. The Arnolds then deed their home over to the trust. As trustees, they may take the home out of the trust at any time, but if and when the Arnolds pass away, the home and any property in the trust will pass to their son outside of the probate process.
The language and structure of such a provision will vary, but once read can be identified pretty easily. An simple one-line version would look as follows: I, Mr. Arnold, retain a life estate in my home in Barnstable, MA, and grant a remainder interest to my son, Little Arnold. In a deed, of course, the property description would be a lot more detailed. Likewise, in a trust the language would be laid out a lot clearer.
Probate Avoidance with the Joint Tenancy
When two people own property as joint tenants in Massachusetts (for example with real estate, checking accounts etc.), each one has the right of survivorship from the other in that asset. This is often as simple as putting both parties’ names on the controlling document, whether a deed or bank account agreement. This is why the joint tenancy, (or “JWROS” Joint tenancy with right of survivorship), is one of the most popular and widely used devices for avoiding probate in Barnstable and Plymouth counties.
There really is little explanation needed to describe how the joint tenancy is created or used, but as estate and probate attorneys on Cape Cod it is necessary to raise as part of an overall probate avoidance strategy. Contact a local attorney to find out which of your assets this may apply to.
How to Avoid Probate with Beneficiary Designation in Massachusetts
Many assets allow for a “payable on death” or “transferable on death” provision to be included in the ownership designation of certain types of assets. These are, of course, well-known with life insurance policies, but can also be added to retirement plans of all kinds, IRAs and other financial accounts. When we help develop an estate plan we direct our clients to inquire with their financial planners, their employers, or the financial institution itself if the client has a direct account. Obtaining and completing a beneficiary designation form is usually relatively quick and painless.
And so if a client does not want to lose control of an asset through a life estate, or risk potential liabilities from a co-owner like a joint tenant, the beneficiary designation is indeed a useful tool when available. And of course, any such assets will pass by operation of law to the designated beneficiary without regard to the probate process.
Using a Living Trust to Avoid Probate
Creating a living trust enables our Cape and Massachusetts estate clients to separate legal title from equitable title. In plainer terms this translates to dividing the right to own an asset from the right to enjoy it. Many trusts operate much like we described above, as a life estate.
As an example, such an instrument might grant the beneficiaries (having equitable title) the right to any income from the asset, but the trustee (having legal title) will decide based on the trust provisions when and how much income that is. Trusts of course vary greatly in language and complexity, so that the provisions would need to be tailored to each individual client situation.
This article would not be complete without a strong recommendation to contact an experienced Massachusetts Estate Planning attorney before attempting to plan your estate with these tools. Even a small amount of expert advice can save you significant hassles in the future.