1. Create a Living Trust
by Admin
Posted on 10-04-2025 01:09 PM
Most people do not use the asset transfer methods listed above to proactively create an estate plan. It is just a fact of life that these transfers do not have to be supervised by the
probate
court. However, it is possible to potentially plan your estate with probate avoidance in mind. A revocable living trust is the ideal estate planning tool for a wide range of different individuals.
The first thing to take note of is the fact that this device is in fact revocable, so you are not bound by your decision to establish the trust. If you ever change your mind, you can dissolve it entirely and take back direct personal possession of the property.
To avoid probate, most people create a living trust commonly called a revocable living trust. It is “revocable” because you may revoke it at any time. In a living trust, the trust is the owner of the assets and not you. Thereby, assets in the trust can skip probate. Another advantage of living trusts is that it helps ensure more privacy, unlike creating a will. To create a revocable living trust you execute a document creating a living trust as a separate entity from you. And then, you, as the person writing the trust (grantor), must "fund the trust" by transferring the property you choose into it.
2. Gift It Away
Gifting your assets during your lifetime is another option. This option involves simply transferring money and property to your heirs before you die. There’s an annual gift tax exclusion and if you make a gift below this amount, it will not be taxable.
In 2023, you are allowed to give away up to $17,000 per person without triggering gift tax. This means if you and your spouse have two children, you are each allowed to give $17,000 to each child this year. You could transfer a total of $68,000 of your wealth. Gifting assets is a simple way to avoid having property transfer through your estate since you won’t own the property at the time of your death.
Gifting assets to heirs while you’re alive is an easy way to avoid probate. Whether gifting small amounts each year or larger lump sums, once given away, the assets are out of the estate and avoid probate. Gifted assets like real estate, cash, cars, and investments go directly to the recipient. Make sure to document gifts and report to the irs if required properly.
4. Designate Payable-on-Death Accounts and Beneficiaries
In some states, you can deed your real estate or vehicle to a specified beneficiary after you die, such as a spouse or child. This is known as a transfer-on-death beneficiary, but may be called a beneficiary deed, depending on the state where you live. You can designate beneficiaries for certain types of bank accounts , such as your savings account. To do this, you'll need to decide who will receive the money in your account after you die. Having a payable-on-death (pod) account not only helps avoid probate but can help your loved ones get access to cash to settle your estate.
Many types of assets – particularly savings, investment or retirement accounts, and life insurance policies – ask you to list beneficiaries. These assets are known as payable-on-death (pod) or transfer-on-death assets or accounts. To convert your assets to pod accounts, all you have to do is fill out a form where you name your beneficiaries. Upon the death of one who owns a given account, ownership is automatically transferred to the named beneficiaries. Pod accounts go directly to your beneficiaries without having to go through probate court.
Each state offers different ways to legally transfer ownership of property after death without going through probate. It is vital that your estate plan is compliant with state laws, especially if it was created in another state. For example, new york does not allow transfer-on-death deeds for vehicles or real estate, so these assets will go through probate if your estate plan is not updated. Common ways to hold or transfer property to avoid the new york probate process include: living trusts. The state of new york allows residents to create a living trust for nearly any type of asset, including houses, properties, vehicles, and bank accounts.
You may not be able to divide your estate the way you want to simply by using beneficiary designations and “transfer on death” forms. Or you may want a more comprehensive solution, especially if you have a lot of assets or complicated finances. Living trusts are the other way to avoid probate. Living trusts are legal documents that, like wills, allow you to detail how you want your property divided and who should care for any minor children. Unlike wills, living trusts take effect while you’re still alive. Once a living trust is created, you must transfer ownership of your property to the trust, which requires changing titles and deeds, to avoid probate.