PROBATE AVOIDANCE Why Many Estate Plans Fall Short


One of the benefits of estate planning is avoiding the need to go to court. There are a multitude of other benefits as well but that goes beyond the scope of this article.

How does a consumer know that their estate plan will successfully avoid probate? This article will teach you what to look for. Note, that despite common belief, having a trust does not in and of itself avoid probate.


We need to examine title in the underlying assets. To put it in another way, most assets (excluding personal property) have some document that evidences ownership. By way of example, the way we know who owns real estate is with a deed. The way we know who owns a bank account or a brokerage account is a deposit agreement. The way we know who owns a car is the title registration. Thus, virtually every asset has a document that identifies the owner. I will refer to these documents listing the owner collectively as “Ownership Documents.”


When a person dies, we look at the Ownership Documents. Does the Ownership Document reflect one of the following: joint ownership or a beneficiary. If the Ownership Document provides the asset is jointly owned with right of survivorship then the other co-owner automatically becomes the sole owner. This is true irrespective of what the Will or a Living Trust says. The same holds true for a beneficiary designation.


We have seen cases where old beneficiary designations unjustly bypassed the surviving spouse in favor of a named beneficiary. The facts are very common. An unmarried employee names his mother as beneficiary when he starts the job. He moves up in the company, and later falls in love and gets married. The employee unexpectedly dies. Despite the fact that you are the surviving spouse, the mother gets the proceeds of the life insurance. Can you imagine being married to someone for over ten years, there is an unexpected death, and the life insurance proceeds get paid to your mother-in-law?


In order to avoid these and similar issues, you want to make sure that when you are preparing your estate plan that you and your attorney are examining your Ownership Documents. You generally need to change ownership to your Living Trust or at least name your Living Trust a beneficiary. Unfortunately, this is where a lot of consumers fall short. They do their research, learn about the Living Trust, go to their local attorney and have a Living Trust prepared. However, they never take the last step of changing the Ownership Documents.


Unfortunately, too often a consumer will not even know they need to change the Ownership Documents. Some attorneys at least provide some instructions, but who has the time to change ownership of their bank accounts and brokerage accounts? That is why firms that focus on Wills and Trusts will have dedicated paralegals helping with the funding of the Living Trust.


In the end, it is your estate. You know whether or not you changed the ownership of your assets. If you are not certain, do your loved ones a favor and make sure that you address the Ownership Documents with a qualified Wills and Trusts attorney.

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