How Can You Avoid Probate?
First option is the piecemeal approach: Make sure that every titled asset that you own as a death beneficiary designated. At a minimum, that means cars, bank accounts, and stock brokerage accounts each have named beneficiaries that are kept up to date. It also means that real estate is held in a form of joint ownership (either “Joint Tenancy” or “Life Estate” ownership) that will result in the property passing to the joint owner at your death.
But this approach has several downsides. As life goes by and you obtain other assets and accounts, you’ll need to remember to name beneficiaries for each new account or asset.
Plus, it is important to bear in mind that creating a joint ownership for your real estate is an irreversible act. If you later want to change the person who is to inherit that property, you must obtain the written and notarized consent of the person currently named as co-owner. That may prove awkward (or impossible) if there’s been a falling-out with that person.
Finally, avoiding probate in this fashion may also result in your heirs paying increased taxes when they sell the inherited property.
The second option is the global approach implemented when you set up a Family Trust or Living Trust instead.
Doing so avoid the downsides described for the piecemeal approach, above. You can make changes to your inheritance scheme without notifying or obtaining the consent of the current heirs. And it will insure that your property is inherited with no tax obligations to the heirs.
It also provides a much more flexible approach for dealing with heirs who may lack the maturity to properly handle the inheritance that you leave them.
So, for most people, the Family Trust option has several significant benefits over the piecemeal approach.