We are asked constantly about avoiding probate. There are many ways to do this. What works best for your situation is a very highly individualized matter. Essentially there are two ways.
- Beneficiary Designations, including Transfer on Death and other similar tools; and
- Revocable Living Trusts
Joint ownership of property also avoids probate provided it is a survivorship interest, such as property owned by husband and wife, or property that is titled between two or more non-married persons that is titled as “Joint Tenants with Rights of Survivorship”, or “JTWROS”. However, other than as between a married couple, using Joint Ownership is fraught with problems and generally should be avoided.
Other beneficiary designations are either a contract right, as in the case of Life Insurance Policies, or Retirement Plans; or else entered into through the Missouri Nonprobate Transfers Law.
Many, if not most types of assets can be dealt with in this manner. To a limited extent you can also designate a “contingent” or secondary beneficiary. Most actions taken pursuant to this law are very inexpensive, or free to implement.
So, why isn’t this the best thing to do? Well, maybe it is. Again, it depends on the particular situation. In the right place these are wonderfully efficient tools. In the wrong place they can lead to disaster.
Use of the Nonprobate Transfers Law does very little, if anything, to deal with a recipient who is disabled, who has money/creditor problems, or who is in a troubled marriage. Leaving property to a minor may result in a Conservatorship, or “Living Probate”. Leaving real estate to multiple beneficiaries may cause problems if the recipients cannot agree what to do with the property. On top of this, sometimes people die in the wrong order!
In other words, using one of these free or inexpensive tools may well wind up costing a whole lot of money, or result in the property or asset going to someone other than the desired recipient.
Using a Revocable Living Trust solves all these problems.
In very general terms, the larger and more complex the estate, and the larger and more complex the family situation, the less likelihood that a Statutory Non-Probate transfer is a good idea.
These areas are complex. A misstep can cost many thousands of dollars, not to mention the heartbreak. Think before you act, and seek professional advice.