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A closer look at estate planning tactics for avoiding probate - II

As we discussed in a previous post, there are a multitude of reasons why people from all walks of life decide to undertake comprehensive estate planning, including the reduction of their estate tax burden, the assurance that their hard-earned assets will be distributed as they see fit, and, of course, the desire to avoid the costly and time-consuming probate process.

Regarding this last point, we examined how joint tenancy could be effectively employed as a mechanism for avoiding formal probate administration. We'll continue this examination in today's post, briefly discussing three additional estate planning strategies to help avoid probate.

Lifetime gifts

A person may transfer ownership of property to a preferred individual during their lifetime, a move designed to ensure that it is not included in their estate upon their passing and thereforenot subject to probate.

It should be noted that the decision to gift property in this manner, otherwise referred to as making an inter vivos gift, can present certain gift and income tax considerations that must be examined carefully. Furthermore, once an inter vivos gift is made, it typically cannot be returned.

Payable on Death Accounts

Payable on death (POD) accounts, otherwise known as transfer on death (TOD) accounts, enable funds to be paid out to a named beneficiary upon the passing of the account holder and bypass the probate process altogether. Here, the beneficiary, who has no access to the account funds while the account holder is alive, will likely be required to provide some proof of the death.

It's worth noting that stocks and bonds can also be passed on in this manner.

Transfer with Retained Life Estate

One of the ways in which the owner of real property can avoid the probate process is by transferring the deed to a preferred individual, but retaining the right to possess it for their lifetime.

By way of example, a father could transfer the family home to his daughter but reserve the right to live there until his death, at which time ownership of the house passes directly to the daughter. Here, the father has what is known as a life estate, while the daughter has what is known as a remainder.

It should be noted that as with inter vivos gift, transfers with retained life estates present certain tax considerations that must be examined carefully.

If you have any questions or concerns relating to estate planning or the probate administration process, consider speaking with a skilled legal professional.

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