Trusts are not always necessary to avoid probate.
Although fully funded revocable living trusts ("living trusts") are commonly recommended for probate avoidance, other estate planning strategies and instruments can also be effective in achieving this goal.
Those with smaller, less complex estates may be able to use a combination of beneficiary designations, ownership arrangements, and transfer mechanisms to pass assets directly to heirs.
Using alternative solutions instead of a living trust may be more affordable for some families.
Whether a living trust or other strategies are used, it is important to regularly coordinate and review the estate plan and its elements.
Like a home, automobile, or anything else in creation, everything is subject to entropy and needs ongoing maintenance and repair to function as intended.
And the human body is no exception.
Multiple avenues exist to avoid probate.
Many people prioritize probate avoidance because of the time and money involved.
When estates are larger or more complex, beneficiaries may face significant delays in receiving their inheritances due to filing requirements, court oversight, and administrative challenges.
Another common concern with probate is its public nature.
Asset inventories, financial information, and the terms of the last will and testament become part of the public record in most jurisdictions.
Desire for privacy and efficiency often leads people to create an estate plan to avoid probate.
Many assets have inherent features to facilitate probate avoidance.
Life insurance policies, retirement accounts, and payable-on-death bank accounts have beneficiary forms allowing for a recipient to be named to directly inherit the asset.
In Kansas and Missouri, everything from brokerage accounts to real estate to titled vehicles (e.g., motor vehicles, watercraft, and trailers) is eligible for transfer-on-death registrations.
This ownership structure allows the owner to have complete control while they are alive and facilitates an automatic transfer after they die, with only their death certificates required to effect the non-probate transfers.
These instruments are only effective if beneficiary designations are kept current.
Failing to update the designations after life events or other changes can lead to unintended distributions because the forms and titles override last will instructions.
Joint ownership can help avoid probate.
When property is held jointly with right of survivorship, the surviving owner will assume full ownership after the other owner dies.
How is joint ownership used?
Joint ownership with right of survivorship often applies to bank accounts, homes, or other shared assets.
Although these facilitate automatic transfers after death, they can introduce significant risks during life.
When another person has equal ownership rights, the asset can be vulnerable to financial problems and to this individual's creditors.
Yikes!
When expectations among family members are unclear, joint ownership can also trigger conflict.
Joint ownership requires thoughtful consideration and careful planning to use this approach effectively and safely.
Note: Absent pay on death or transfer on death designations on the jointly held assets, probate will be necessary upon the death of the last surviving joint tenant.
Some states offer modified probate proceedings for qualifying small estates.
Rather than requiring full court proceedings, they allow for beneficiaries to transfer assets through abbreviated court proceedings or through affidavits.
State laws govern whether an estate qualifies for small estate probate proceedings.
Eligibility may be assessed using the total value of the estate, with some assets counting toward or being excluded from the evaluation of its relation to the threshold.
Legal requirements must still be met even with a simplified process.
Prior to relying on a small estate process to bypass standard probate proceedings, families should confirm the estate meets eligibility requirements.
In Kansas, the small estate affidavit process is available when there is no real estate subject to probate and the total value of assets subject to probate does not exceed $75,000.
In Missouri, the process is similar to that in Kansas but has a few more "moving parts," and the total value of assets subject to probate cannot exceed $40,000.
By gifting assets while you are alive, less property will be subject to probate when you die.
This strategy has multiple benefits.
"Giving with warm hands" provides for the needs of loved ones during your lifetime.
You get to see them use, apply, and enjoy your generosity.
In addition, when you are giving while you are living then you are knowing where it is going.
Translation: If you witness the financial irresponsibility of an heir firsthand, then you can adjust your estate planning accordingly to protect their inheritance "from and for" them.
Lifetime gifting also removes assets from your estate, let alone the future appreciation on the assets, and can subsequently reduce estate taxes.
Gifts should be made strategically to avoid negative tax consequences of large transfers and to prevent long-term financial insecurity.
Combining various strategies and instruments to avoid probate is only effective when they are properly coordinated.
Outdated documents, inconsistent ownership structures, and conflicting beneficiary designations can create chaos and derail wishes.
Even families who are implementing strategies to avoid probate will benefit from having a last will and testament.
Why would a last will prove beneficial?
A last will can provide instructions for matters like guardianships for minor children or for assets that have been unintentionally overlooked by other methods.
Regular estate plan reviews can ensure your plan functions appropriately.
Although bypassing probate can improve the efficiency of asset transfer, it can also limit oversight.
With less oversight, there is less accountability for protecting your interests.
When families have more complex relational dynamics, they can benefit from court involvement and structure to preserve relationships and goals.
No, Virginia, probate is not the greatest evil of the modern world.
Although a living trust is a beneficial estate planning instrument for addressing various goals, it is not the sole solution for avoiding probate.
Choosing a combination of ownership structures, beneficiary designations, simplified transfer procedures, and gifting strategies can streamline distribution to heirs.
Whether you choose a trust or other instruments, an effective estate plan should be reviewed and maintained to continue to meet current needs.
Alternative methods exist for probate avoidance in addition to living trusts.
Assets such as insurance policies and retirement accounts require updated beneficiary designations to facilitate direct transfers to the intended beneficiaries.
Although joint ownership allows for the surviving owner to assume full control of the asset immediately, it creates greater vulnerability to legal or financial risks.
Estate planning documents must be coordinated to effectively avoid probate.
Warning: This particular post is a general introduction to a subject with many hidden complexities for the unwary.
For example, the only inheritance option when choosing to transfer assets directly into the outright control of a beneficiary can be catastrophic if the beneficiary has means-tested public assistance benefits, is a spendthrift, or will experience a divorce, lawsuit judgment, or bankruptcy.
Your estate plan should not be approached as a DIY project.
Seek the assistance of an experienced estate planning attorney to guide you through the minefield safely.
This post is for informational purposes only and does not provide legal advice. You should consult an attorney for advice on any specific issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.
Reference: Forbes (March 28, 2022) "7 Ways to Avoid Probate Without a Living Trust"
REMEMBER: “The choice of a lawyer is an important decision and should not be based solely upon advertisements.”
This statement is required by rule of the Supreme Court of Missouri.
