How to Avoid Probate


What is probate?

Probate is the court-supervised procedure for transferring ownership of an individual’s assets after death.

Why not go through probate?

First of all, it is slow (1 to 3 years). Second of all, it is costly – 2% – 4% of the gross assets of the estate.

How to avoid probate

Common methods: jointly held property, beneficiaries on life insurance, annuities, 401(k)s and IRAs, Payable on Death designations for bank accounts and Transfer on Death designations for investment accounts.

What about Trusts?

In 1965, more than 50 years ago, Norman F. Dacey wrote a book entitled How to Avoid Probate! The book advocated using trusts to avoid probate. At the time the book was written, almost every estate went through the probate process. Very few estates were structured to avoid probate.

Mr. Dacey was not an attorney, and the book infuriated attorneys all over the United States. Several states charged him with “practicing law without a license.”

Nevertheless, the book was extremely popular. Two million copies of the book were sold. It went through five editions, with the final edition being 1993, almost 30 years from the first edition.

The long-term result is that today trusts are commonly used to avoid probate.

I recently found the book How to Avoid Probate! by Norman F. Dacey at a used book store. Besides its history, it is an early example of what people do today with LegalZoom and other on-line do-it-yourself websites. The book is 8 ½” by 11” and contains 238 forms which can be torn out and completed. Also for every form, there is a duplicate of the form so that you can simply insert carbon paper and make a duplicate.

What should you do?

You can avoid probate on most of your assets by adding beneficiaries to your life insurance, annuities, 401(k)s and IRAs and by making your bank accounts Payable on Death and your investment accounts Transfer on Death.

However, for real estate, there is no way to list beneficiaries. A trust will need to be established and your real estate transferred to the trust, in order to avoid probate.

There are different types of trusts. Mr. Dacey had 23 types of trusts in his book. You need to see an attorney, preferably one specializing in estate planning, for legal advice on what type of trust, who should be the trustee, who should be the successor trustee, who are the beneficiaries, what if a beneficiary dies before you, and other issues. Then assets need to be moved to the trust in order for the estate plan of avoiding probate to work. This is not a Do-It-Yourself (DIY) project.

If you have any questions about the role probate may play in your estate planning and how to avoid the time and expense of this process, contact Pearson Bollman Law at 515-298-8850 for a consultation.

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