Non-Probate Transfers: Avoiding Probate

Important at the outset is that non-probate transfers at death do not reduce estate taxes that the decedent's estate may otherwise be required to pay. However, such transfers are sometimes advantageous since they pass property to the intended beneficiary upon death and require no court intervention. As with any matter related to probate or estate planning, you should always speak with a lawyer competent in such matters such as west Texas attorney Matt Watson of El Paso, Texas. A listing of various methods of transferring property outside of the probate process and discussion of each is as follows:

Living trusts

A trust is a legal entity created by a grantor for the benefit of certain designated beneficiaries. A living trust is created and funded by an individual who appoints himself as the trustee as well as beneficiary. Income is personal income and creditors of the grantor can seize assets held within the trust. Upon death or incapacity, a substitute trustee identified in the trust is appointed and at death, new beneficiaries are identified. On the upside, living trusts are great for those who desire to avoid having their assets listed on court documents. A living trust is also a tool for managing one's assets upon incapacity. For those persons with real property located in other states where a sometimes costly ancillary probate procedure would be required, a living trust is sometimes helpful. On the downside, living trusts can be costly both in terms of initial and ongoing expense. A living trust only works as to property held by the trust. Many times, individuals forget to convey title into the trust. In such instances, such assets will pass pursuant to the Texas laws for persons without a will. Finally, a will (pour-over will) is still needed to transfer ownership of certain smaller assets that are not part of the living trust at death. Such will still requires probate. If you need a competent west Texas lawyer to explain the pros and cons of living trusts, contact attorney Matt Watson of El Paso, Texas.

Real property held in joint tenancy with right of survivorship

Joint Tenancy is a legal form of ownership wherein real estate is held under the names of two or more persons jointly. Upon death, the property passes to the remaining owners. On the upside, converting ownership in this manner is rather quick and easy. However, once the ownership has changed, the new owner will have to consent to removal. Further, there may be immediate tax consequences in certain instances.

Life Insurance payable to a third person

This non-probate transfer allows a life insurance policy payable upon the death of the insured to be paid to a named beneficiary upon proof of death. Life insurance can be a helpful estate planning tool for certain persons. As part of proper estate planning, one should review life insurance in place to verify who the policy is payable to.

Certain government benefits & Individual Retirement Accounts

This non-probate transfer allows such benefits and funds to be made payable to named beneficiaries provided for by the decedent.

Gifts made before death

Gifts made before death are not owned at the time of death. As a result, they are typically not part of a decedent's estate. However, annual gifts to a person other than an individual's spouse which are in amounts in excess of the annual exclusion ($12,000.00 for 2006 {should increase for 2007 with inflation}) and not made to a charity, to a political organization for its use, or for tuition and medical expenses paid on an individual's behalf are taxed subject to a lifetime gift tax credit available. However, one popular gifting method is to purchase life insurance payable to a particular beneficiary upon death. Premiums up to the annual exclusion are used to fund such insurance.