Some clients prefer not to put a revocable trust in place – they may have minimal assets, they find it too complex, they might find it too costly. But, if the primary estate planning document is a Will – the estate will go through probate court.
Is there a way to minimize this issue? Yes, although there are some limitations.
Real Estate. Your home if owned in one name alone at the time of death would need to go to Probate Court. The alternative is to transfer ownership of the real property into joint ownership (with the right of survivorship). In this way, upon the death of one co-owner, the property will transfer to the survivors by operation of law.
Is there a downside? If you transfer the property from Mom to Mom and children, joint tenants with the right of survivorship, the children have an ownership interest in the property. This means that their approval and signatures would be needed to sell the property. Additionally, if they have creditors, the property could become subject to their legal obligations.
The alternative? A “Lady Bird Deed”. In this type of deed, the property is transferred from Mom to Mom and children, joint tenants with the right of survivorship, however, Mom retains a life estate with the right to transfer the property and keep the proceeds. The allows for the transfer by operation of law from Mom to her children upon her death without the need for Probate. It also gives Mom the control of her property until she dies.
Financial Assets. Many banks and financial institutions will allow for a Transfer on Death (TOD). This is similar to beneficiary designations. In this way, the assets are transferred upon death to the named beneficiaries without the need for Probate.
Are there drawbacks? This may not present the flexibility that a Will or a Trust can provide for contingencies. In a Will or a Trust, the grantor can provide for distribution to individuals, but also provide for alternative beneficiaries in the event that the primary beneficiary fails to survive the grantor. This may not be possible with Transfer on Death provisions.
Will Still Needed. If an individual executes a Lady Bird Deed and puts Transfer on Death provisions for his or her assets, a Will is still a good idea. There are assets that can be missed, there can be unanticipated income to the individual after his or her death that will be in his or her name alone. Where is that income to go?
The Will becomes a safety net to assure that all of the assets are directed to the correct individuals.
Is a Lady Bird Deed and Transfer on Death provisions on your assets enough for your estate planning needs? It is important to discuss these issues with a professional to evaluate what is best for you and your estate. One size doesn’t fit all.