Avoiding probate doesn’t always have to be complicated. You can take simple steps to ensure that certain types of property pass to your heirs without going to probate court. One of the easiest methods is to designate beneficiaries to inherit your bank accounts, retirement accounts, securities, vehicles, and real estate automatically, without probate.
Payable-on-Death Bank Accounts
Payable-on-death bank accounts offer one of the easiest ways to keep money — even large sums of it — out of probate. All you need to do is fill out a simple form, provided by the bank, naming the person you want to inherit the money in the account at your death.
As long as you are alive, the person you named to inherit the money in a payable-on-death (POD) account has no rights to it. You can spend the money, name a different beneficiary, or close the account.
At your death, the beneficiary just goes to the bank, shows proof of the death and of his or her identity, and collects whatever funds are in the account. The probate court is never involved.
If you and your spouse have a joint account, when the first spouse dies, the funds in the account will probably become the property of the survivor, without probate. If you add a POD designation, it will take effect only when the second spouse dies.
Retirement Accounts
When you open a retirement plan account such as an IRA or 401(k), the forms you fill out will ask you to name a beneficiary for the account. After your death, whatever funds are left in the account will not have to go through probate; the beneficiary you named can claim the money directly from the account custodian. Surviving spouses have more options when it comes to withdrawing the money, than do other beneficiaries.
If you’re single, you’re free to choose whomever you want as the beneficiary. If you’re married, your spouse may have rights to some or all of the money.
Transfer-on-Death Securities Registration
Almost every state has adopted a law (the Uniform Transfer-on-Death Securities Registration Act) that lets you name someone to inherit your stocks, bonds or brokerage accounts without probate. It works very much like a payable-on-death bank account. When you register your ownership, either with the stockbroker or the company itself, you make a request to take ownership in what’s called “beneficiary form.” When the papers that show your ownership are issued, they will also show the name of your beneficiary.
After you have registered ownership this way, the beneficiary has no rights to the stock as long as you are alive. But after your death, the beneficiary can claim the securities without probate, simply by providing proof of death and some identification to the broker or transfer agent. (A transfer agent is a business that is authorized by a corporation to transfer ownership of its stock from one person to another.)
Transfer-on-Death Registration for Vehicles
Arizona, Arkansas, California, Connecticut, Delaware, Illinois, Indiana, Kansas, Missouri, Nebraska, Nevada, Ohio, Vermont, and Virginia offer car owners the sensible option of naming a beneficiary, right on their certificate of registration, to inherit a vehicle. If you do this, the beneficiary you name has no rights as long as you are alive. You are free to sell or give away the car, or name someone else as the beneficiary.
To name a transfer-on-death beneficiary, you’ll need to fill out the paperwork required by your state’s motor vehicles department.
Transfer-on-Death Deeds for Real Estate
In some states, you can prepare a deed now but have it take effect only at your death. These transfer-on-death deeds must be prepared, signed, notarized and recorded (filed in the county land records office) just like a regular deed. But unlike a regular deed, you can revoke a transfer-on-death deed. The deed must expressly state that it does not take effect until death.
States that allow TOD deeds are Alaska, Arizona, Arkansas, California (effective January 1, 2016), Colorado, District of Columbia, Hawaii, Illinois, Indiana, Kansas, Minnesota, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Texas, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
WFB Legal Consulting, Inc.–A BEST ASSET PROTECTION Services Group–Lawyer for Business