Estate Planning Part I: Avoiding Probate
In Ohio, when done correctly, tailor-made estate planning can help your family save thousands of dollars and one way to achieve that is to avoid the probate process. Probate law is an area of law designed to help people who cannot speak for themselves. This includes guardianships of adults and children and also decedents (a nice way to say dead people). Probate law assumes that all assets are probate assets unless a clear intent exists to make the asset non-probate. When your assets enter the probate process, your estate will be subjected to court costs, attorney fees, attack by creditors, and a myriad of other expenses. One way to avoid this headache for your loved ones is to make all of your assets non-probate. Of course, everyone has heard of the wonders of a trust, an entity that can become the owner of all of your assets. While trusts do avoid the probate process, they can be expensive and may not be the right solution for your family. There are five times that trusts become the cheapest, clearest, and most recommended route and that topic will be left to another article.
For most people, the best route to avoid probate is to make your assets non-probate on an a-la-carte basis. All of your stuff can have a designated beneficiary listed on it somehow and this is how we make it non-probate. For real estate, you can get a Transfer on Death Designation Affidavit to list who you want to have your property when you die. This document simply needs to be recorded at the local recorder’s office before you die, to be effective. Alternatively, you can get a Joint Survivorship Deed listing off who will get your half of the property when you die. Be wary of this Deed, though, if you have an active mortgage, and you change title using this deed, then the acceleration clause in the mortgage might be activated making the balance due immediately. Another pitfall of the Deed route is that the other person immediately owns half of your property which means their creditors can attack it.
Similar rules apply to bank accounts. You can talk to your bank’s teller, and ask to make your accounts “payable on death.” This designation allows you to list who gets the account next. Alternatively, you can make the account joint but the same creditor/ownership pitfalls apply here as well and the other person could clear your account at any time. For IRAs, annuities, and other investment accounts, simply ask to list your beneficiaries on the account. Stocks and bonds can be given a Transfer on Death (TOD) designation from either the company or the government (depending on if it’s a stock or a bond). They also can be made joint with the same pitfalls as the other joint assets. For cars, boats, four-wheelers and anything else with a title, you can go to the local title bureau and ask for a new title listing either a transfer on death person, or make it joint but the same pitfalls apply.
Most personal property beyond that has little to no value and the court usually doesn’t bother with it. But if you truly want to make sure that these assets remain non-probate and pass to a particular person, then the best way is to get a lock box at your local bank and designate a beneficiary on the lockbox itself. The problem here is that you must then put that item in the lock box and lock it away. For that reason, it’s always important to have a will as a back-up. Just to be safe. In any event, if you avoid probate, you save your family so much time, effort, and money. Put them before yourself and protect their future!