How to Avoid Probate
Our number one goal is to educate our clients about the probate process, what it is, how it works, and why people want to avoid it — us attorneys included! In Massachusetts, when someone dies, their assets (bank accounts, real estate, retirement, investments, online accounts) need to “go somewhere.”
Here is the background:
According to my Google search, the term “probate” comes from the Latin word “to prove.” Back in the day, the English legal system used the term probate when referring to proving a will was valid. Today, it is the name of the court where you file a will, among other things. The probate supervises the process of assets being transferred from the decedent’s name to the next owner. That next owner can be named in the will, or an heir at law (like next of kin). We have a statute that dictates who a decedent’s heir(s) at law is at the time of death. The statute is complex, and the process involves many forms which are not easy to navigate and file properly. It usually takes a year or two and it’s expensive to hire an attorney to help navigate the process. Furthermore, all probate assets are frozen until the court gives its blessing (in the form of “Letters of Authority”). When an asset is frozen, homes can’t be sold and cash can’t be accessed. It’s quite stressful!
What is a probate asset?
So the first question we ask when a client passes away is do we have any probate assets? A probate asset is an asset in the decedent’s sole name at death. Therefore, if there is a joint owner, a beneficiary, a trust, or someone else’s name attached to the account/asset, then it is not a probate asset, and therefore will not go through the probate process.
As a side note, having a power of attorney (POA) on an account DOES NOT avoid probate. The power of attorney is a document that is only valid while the principal is alive. Once they die, the document dies too. So, if you are POA for someone, that does not mean you are a joint owner or that they are set up to avoid probate.
So how do we avoid probate?
Checking and savings accounts – you can do a Transfer On Death (TOD) designation at the bank. This is like naming a beneficiary on the account. The named persons do not have access to your account until after you have passed away. BUT doing a TOD puts another name on the account, so it will avoid the probate process.
Trusts – Assets move to a trust WHILE YOU ARE ALIVE will avoid the probate process. When you move an asset to a trust, it is retitled in the name of the trust. Therefore, it is no longer in the decedent’s SOLE name at death. Having a trust is great, but you still must place assets into it for it to work! Utilizing a trust for real estate is very common because you can’t update a beneficiary form for real estate. Furthermore, there could be negative tax consequences for adding someone’s name to your deed.
Life Insurance, retirement, and investment accounts – Update and check your beneficiary designation forms! This can typically be done online, or through your Human Resources department if your account is through work.