2 Ways To Avoid Probate Court Without A Lawyer

Probate Court is an Orphanage for Orphaned Assets – assets that are no longer owned by a living person, trust, or jointly by a survivor or by a previously designated “Pay on Death” beneficiary. Probate Court costs time and money, about 6 months (often much, much longer) and about 4.5% +/- straight off the top of all probated assets. It also often creates a good deal of stress at a time you are already dealing with the loss of a loved one and related family dynamics.

Except with respect to real estate, there is much you can do on your own to avoid probate without a lawyer by making sure each of your key high value/low risk assets are not owned by you, and you alone, and thus, orphaned at the time of your death.  Here is how:

Probate Court

1. Joint Ownership. Own your high value/low risk assets (home, checking accounts, savings accounts, etc.) jointly with some one else, such as your spouse. If you die, hopefully your spouse did not pass away at the same time, and he/she still owns what he/she owned with you jointly all along before your passing: ie. the whole house or bank account. There should be no charge by your bank for this service, but see below for Real Estate joint ownership.

2. Pay On Death. Ensure your beneficiary designations are filled out. “Beneficiary Designation” is the term that investment houses use to transfer ownership of your accounts to those of your choosing at the moment of your death without going through Probate.  At banks, they use the term, “Pay on Death” or “POD.” At the Dept. of Motor Vehicles (DMV), it’s called, “Transfer on Death,” or “TOD.” 

“Beneficiary Designation,” “Pay on Death,” “Transfer on Death,” “Beneficiary Deed,” all mean the same thing: this asset becomes the property of this person(s) upon the triggering event of my death. The DMV currently charges $5 to change your title to your car to include a TOD, but your bank should charge you $0 for a POD attached to your account.

Through POD’s you can sometimes leave your assets in this way to multiple people in equal shares, even to their kids if they have passed away before you have (“PSS”), but once you start tailoring the conditions and amounts too much, you often exceed the scope of the POD form as well as the comfort-level of the institution you are dealing with. At that point, you need to consider a Will and/or Trust to achieve a higher level of detail. 

FAQ’s

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1. Are there any risks to Joint Ownership? Yes, you expose what you own jointly to that person’s whims and life risks. If you “put someone on your checking account,” for example, that means that that account is also theirs, and they can clean it out or even overdraw at any time.  It also means that if they have creditor issues or a fragile marriage to another, for example, your account is exposed to their risks of judgments, bankruptcies, and divorce.

2. Should I own assets Jointly with my Spouse? In general, if it is a high value/low risk asset, such as a house, investment account, bank account AND your spouse is trustworthy, then, Yes.  What you have to gain in addition to Probate protection is marital Liability Protection, known as “Spousal Immunity” or the “Marital Property” exception. This means that if you get sued (just you, and not your spouse is sued), anything you and your spouse own together that is not related to the lawsuit can not be subject to garnishment or judgment from that suit, because your joint spousal ownership of your home, for example, is such that the law can’t tell where your ownership ends and your spouse’s begins – it’s entirely blended together. The public policy behind this has to do with the value society traditionally places on marriage and that a spouse shouldn’t lose everything just because his/her spouse got sued. I call Spousal Immunity/Marital Liability Protection the “First Castle Wall,” and it’s free…so long as you title assets in both spouse’s name.

3. What should I NOT own Jointly with my Spouse? In general, low value/high risk assets should not be owned with your spouse, such as vehicles, gun collections, small businesses, boats, ATV’s, etc. In other words, if the value of the asset is diminishing, and of your many assets it is one that is most likely to get you sued (car accident, ATV turn-over, small business debt, etc.), then in general, it is best to own that asset only by the person who does the most with it (main driver of specific car, key employee/owner of a small business, etc.)

4. Why do I need a lawyer for Real Estate?  If it is your marital home (high value/low risk) and not rental property (high value/high risk), then typically you should own it with your spouse. However, unless your spouse’s name is already on the title such as from the time of purchase, then you will need a lawyer to prepare a deed to create joint ownership and/or beneficiary ownership, and file it with the Recorder of Deeds. You want to get this right as it is often one of your most valuable assets. Title companies and the Recorder of Deeds won’t help you…unless you are already doing work (buying/selling a house) with a title company. Do not attempt a Warranty Deed or Beneficiary Deed yourself with on-line forms as you may do more harm than good as it will take far more legal costs to clean up a mistake than to do it right the first time, if the mistake can be corrected after your death at all. Also, when it comes to farms or recreational acreage, you need to take a closer look with your lawyer and accountant at the potential operational risks and tax issues. Those discussions will be money well spent as it will give you options, might find you tax savings, and should give you peace of mind.

5. Do I really need a Will? Maybe not. Your Will (Last Will and Testament) is simply instructions to the Probate Court, a place you don’t want to be in the first place. It is the last safety net for your “Orphaned Assets,” so that they go to whom you want them to.  However, like most safety nets, a Will is best when it is never used, ie. you want to avoid Probate Court if possible. If you already carefully titled your assets so that they pass to someone else on death (“POD”) or are otherwise jointly owned, then your Will has a good chance of never being used, because your assets are owned or pass to someone else automatically upon your death and already avoided Probate. It is good practice to go through your key assets annually, maybe after you file your taxes when you have all those 1099’s to guide you, to ensure your key assets are either jointly owned &/or paid to some one on death (“POD”).

You actually already have a Will, but just don’t know it. Without creating a specific Will, every one already has a Will by statute, which in Missouri, essentially states in the first instance that if you die without a Will of your own making (and your assets didn’t already pass to others through POD’s or joint ownership), then half of your Orphaned Assets go to your spouse, and the other half go to your children. Most people create Wills as a safety net to ensure that their spouse gets not 50%, but 100% of their assets, then the kids can have it all after both spouses have passed away. What they don’t often realize is that you can do most, if not all, of this Probate Avoidance Planning, through use of free “POD’s” above.

6. What is the bare minimum I should have to protect my family? This is a personal question involving lots of factors including whether you have minor children, but we suggest, at least:

a. Maximize your POD’s and Beneficiary Designations (For Free),

b. Make sure your home is jointly owned &/or has a Beneficiary Deed,

c. Create a Power of Attorney (see related articles), 

d. Maybe create a Will mainly to provide you peace of mind, though if you did “a – c” above diligently and thoroughly, your Will will not make it to Probate Court because none of your assets did (Good!).

If you have more questions or need additional anti-probate options, see our related articles such as on Trusts and Powers of Attorney, e.g. To Trust or not To Trust and My Avatar – My Power of Attorney, or give us a call today! Disclaimer: As always, this is a summary of Estate Planning Options. Do NOT use this as a substitute for tailored Legal Advice