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Five Estate Planning Probate Avoidance Strategies You Should Consider Implementing

Five Estate Planning Probate Avoidance Strategies You Should Consider Implementing

February 29, 2024

In life, I believe that planning for the future and taking the necessary steps to achieve your goals are essential for financial independence. This principle holds true for planning the financial legacy you will one day leave to your loved ones. In this newsletter, I will discuss probate, its significance, and the essential steps to simplify wealth transfer after one's passing, making it easier and more cost effective for your beneficiaries.


Probate, also known as estate administration, is the legal process that occurs following your death. It establishes the validity of your will, identifies, locates, and collects your assets, pays off your debts, and approves the transfer of remaining assets to the beneficiaries named in your will. While there are some advantages to going through probate, there are numerous disadvantages. The probate process can be complex and costly, often consuming 3-5% of your estate. Additionally, probate can be time-consuming, taking 12-24 months or more to complete. Furthermore, probate is a matter of public record, granting access to your financial records to anyone interested.


To avoid these disadvantages, consider implementing my top five estate planning probate avoidance strategies:


  1. Establish a Revocable Trust and Transfer Title of These Assets into Them – Many individuals use trusts to maintain control over asset distribution timing, provide protection from creditors, and ensure privacy. Assets transferred during one's lifetime into a revocable (living) trust avoid probate, unlike assets placed into a trust after death.


  1. Establish and Update Beneficiary Designations – Life insurance, annuities, retirement plans, and IRA proceeds can avoid probate if beneficiary designation forms are properly completed. Regularly review and update these forms to align with current wishes, avoiding situations where assets go to individuals who have predeceased or are no longer close to you. I once came across a situation where an individual passed on and left his entire retirement plan to an ex-wife that he had not spoken to in over 30 years, and his current wife received nothing. This is a great example of why you need to review your designated beneficiaries today.


  1. Use Certain Joint Ownership – Real estate or personal property, including bank and brokerage accounts titled in joint ownership with the right of survivorship (JWROS) or tenancy by the entirety (TE), available to married couples in some states, bypass probate, transferring title immediately to the surviving joint owner at the death of the first co-owner.


  1. Use Transfer on Death (TOD) Registrations – This allows bank and brokerage accounts to pass directly to the named beneficiary, avoiding the time, expense, and complexity of the probate process. For individually held stocks and bonds, transfer them to a brokerage account with the TOD designation to bypass probate.


  1. Transfer Real Estate Outside Your Resident State into a Trust or LLCAvoid the costly probate process in another state by transferring ownership to a trust or LLC. This ensures an easy transfer of ownership to the designated beneficiaries.


Ultimately, retaining an estate planning attorney to draft necessary legal documents is crucial. This is also an opportune time to update your will, healthcare proxy, power of attorney, and living will. The costs incurred now will save your beneficiaries significant money and time in estate administration. If you do not have an estate attorney, I would be more than happy to recommend a few for your consideration.


I hope you find this newsletter helpful. If you have any questions, please do not hesitate to reach out to me.


John J. Vento, CPA, MBA, CFP®

President & CEO

Financial Advisor