Although we may not be sure we know what probate is, we have an almost innate fear of it and want to avoid it.
Google it. You will find multiple definitions so you are not the only one unsure about what it is. The definition I like best is that probate is the legal process for winding up the financial affairs of a deceased person.
Although we may disagree on the definition, most experts agree there are two primary purposes of probate: (i) provide a forum (or place) for creditors to assert their claims and (2) transfer assets of the deceased person as directed by the will of the deceased or, if there is no will, as dictated by state law. Most of us are not interested in providing a forum for our creditors but we want our assets to go to loved ones quickly and easily.
Since most of our readers are in the real estate business, I will limit this discussion to five ways to transfer title to real estate and avoid probate. It is foolish to own real estate and not have a will. For the price of a decent pair of shoes, you can have a will prepared. For the cost of a decent suit of clothes, you can have an entire estate plan including a will, financial and medical powers of attorney and a living will.
And you can find a local lawyer to do this. You don’t have to resort to the “document in a box” websites or do-it-yourself books.The techniques used below can help you avoid probate but should be part of a comprehensive estate plan. There are advantages and disadvantages to each method discussed. Get more detailed legal counsel before using any of them.
TRANSFER ON DEATH DEED
In eptember of 2015, legislation permitting the use of a Transfer on Death Deed “TODD” became effective. The TODD allows a property owner to pass title to a third party effective upon death. Once the TODD is prepared, signed and recorded, no probate is required to transfer title at death. This is a significant new tool in estate planning. Texans have long been able to transfer title to bank accounts, retirement accounts, and life insurance policies without probate. Transferring title to real estate was always more difficult. The new legislation now makes it possible to transfer title to real estate without probate and without suffering the tax liabilities some of the other methods discussed below will have.