The probate process can be long and costly, taking months and sometimes years to resolve. The longer it takes, the more it will cost, leaving potential heirs with less than the deceased may have intended. For these reasons, most people will try to avoid probate in any way possible.

Transferring assets outside of the probate process can not only save the estate a lot of time and expense, but can also help loved ones avoid years of legal hassle. There are four general ways to pass on your property and avoid the probate system:

• Joint Property Ownership
• Death Beneficiaries
• Revocable Living Trusts
• Gifts

Joint Property Ownership

Jointly owned property with the "right of survivorship" avoids the probate process for one very simple reason: upon death, the deceased joint owner no longer owns the property and it passes to the living joint owner. There are several ways to do this, and the chosen method will depend on what a particular state recognizes.

To create any of these forms of joint ownership with a right of survivorship, states typically require a written document that sets out the joint ownership relationship, the property that is jointly held, and the right of survivorship. Here are the most common forms of joint property with a right of survivorship:

• Joint Tenancy with a Right of Survivorship: as the name suggests, you take property as "joint tenants" and upon the death of a joint tenant, the surviving tenant takes the deceased tenant's portion.
• Tenancy by the Entirety: this is a form of ownership only available to married couples (and some same-sex couples in a few states). It works in much the same way as a joint tenancy with a right of survivorship, in that effectively upon the death of one spouse, the living spouse takes the deceased spouse's portion.
• Community Property: in community property states, married couples can hold property as community property with the right of survivorship. It has the same effect upon the death of one spouse as a tenancy by the entirety, where the surviving spouse takes full ownership of the property.

Death Beneficiaries

Many types of financial assets and instruments allow you to designate a beneficiary upon your death. Upon your death, these assets become the property of whomever you designate as the beneficiary, are no longer a part of your estate, and thus avoid probate entirely. Here are some of the most common financial assets that allow you to do this:

• Payable on Death (POD) Accounts: as the name suggests, POD accounts are simply accounts with an instruction that upon your death, the account shall be inherited by a beneficiary that you name. They are extremely simple to setup, with most banks simply requiring that you fill out a form naming the beneficiary. The beneficiary simply shows up to the bank with the proper identification and collects the account upon your death.
• Retirement Accounts: an increasingly popular option to avoid probate is the use of retirement accounts, specifically IRA and 401(k) accounts. When you establish these accounts, you will be asked to name a beneficiary of the account upon your death. As a single person, you are free to name whomever you want, but be aware that as a married person, your spouse may inherently have a right to some or all of the money in a retirement account.
• Transfer on Death Registrations: many states allow you to transfer securities (stocks, bonds, brokerage accounts) as well as vehicles without going through probate. Much like POD accounts, you will sign a registration statement that declares who you want your securities or vehicles to pass to upon your death.

Revocable Living Trusts

A revocable living trust occurs when you transfer property to someone else (the trustee) to hold it for your benefit, but you reserve the right to revoke the trust. This means that the trustee actually owns the property, but must use it for your benefit under the terms and conditions of the trust.

By giving ownership of the property to the trustee, the property is no longer a part of your estate and can avoid the probate process entirely. You can instruct the trustee that, upon your death, he or she should transfer the property to your family and friends. This effectively transfers property without going through probate.

Trusts are set up in formal documents, much like a will, so make sure that you are complying with your state's requirements for a trust when setting one up.

Gifts

Finally, one of the most obvious but often overlooked ways to avoid probate is to simply give your property away before your death. This requires a certain amount of planning and forethought, and even the best plans may be thwarted by unseen circumstances. As a result, you should generally only consider using gifts to avoid probate on smaller, less valuable assets. Also be aware that gift taxes apply if the gift is in excess of a certain amount, so this is typically a good option only if the asset is below the gift tax threshold.

See also:

• Avoiding Probate FAQs
• The Advantages of an Inherited Roth IRA

Learn More About the Probate Process from an Attorney

Not sure how to avoid the probate process or if you even should? Don't worry. Many people have similar questions and go through the same line of questioning when deciding how to make their estate plan. The good news is that you can contact a local estate planning attorney to answer your questions and help make the things easier.