Probate is the legal process by which property owned by a person is transferred to that person’s heirs upon his death. Many people wish to avoid probate for a number of reasons. The most cited reasons are time- a full administration typically takes between 6 months and a year, money- between court costs and attorney fees the estate and ultimately the heirs can take a considerable financial hit, and the desire for privacy- probate proceedings are public record.
There are a number of different legal mechanisms available to avoid probate. The following is a list of a few that you may wish to consider.
1. A revocable trust, also known as a family trust or a living trust, enables your assets to transfer to the heirs of your choice upon your death outside of probate. In addition to the probate avoidance advantage, a trust also has many additional benefits. A trust allows you to exert control over your assets after your death rather than having them go outright to particular people or entities. For instance, if one of your children is young, irresponsible with money or has creditor problems, you can make delayed or intermittent distributions to that child or appoint a trustee to make discretionary distributions based on need. A trust can allow you to provide for a special needs loved one without affecting his government benefits. A trust can also be a powerful planning tool for second marriages. You can provide for a second spouse while ensuring that any remaining funds after her death are preserved for your children. The possibilities are limitless, as the trust can be designed purely to meet your individual needs.
2. Payable on death (P.O.D.) designation on a bank account allows your bank account to transfer upon your death to a designated beneficiary. This designation does not in any way effect your ownership rights during your lifetime and can be changed at any time as long as you’re alive and competent. The interest of the beneficiary only vests upon your death.
3. Transfer on death securities registration, much like a P.O.D. bank account, allows your securities to transfer upon your death to a designated beneficiary. Ohio law provides that in order to make this designation, the abbreviation “TOD” must be placed after the name of the registered owner and before the name of a beneficiary on a registration in beneficiary form. Also, like a P.O.D. on a bank account, the designation has no effect on ownership during your lifetime and can be
canceled or changed at any time.
4. Transfer on death designation affidavits for real estate like the designations cited above, can be changed or revoked at any time during the lifetime of the owner and has no effect on the owner’s interest. A partial or total interest can be created to one or multiple people. Upon death the designated beneficiary would simply have to file a death certificate and an affidavit with the recorder’s office in order to effectuate the transfer.
5. Transfer on death designations for automobiles are again similar to the designations already cited above. A person who has a certificate of title for a vehicle, watercraft or outboard motor showing sole ownership can make an application for certificate of title to designate the same in beneficiary form by the abbreviation “TOD” after the name of the owner and before the name of the beneficiary. Like the other designations, it can be changed or revoked at any time and the interest only vest in the beneficiary upon your death.
It should be noted that while probate avoidance can be a worthwhile goal, every individual’s situation is different and other considerations may make these vehicles disadvantageous. The best way to ensure an estate plan that meets your needs is to speak with an estate planning attorney.