When people came to me as a practicing lawyer and said they needed a Will, my first question was simple: “Why?” I frequently heard the same answer: “I want to avoid probate.”

There is an obvious problem with that response. A Will does not avoid probate. In fact, a Will commonly channels the estate into a probate proceeding – directing how a person’s property is to be distributed after death. If avoiding probate is the principal objective, there are ways to do so.

Over the years, I came to believe that many people need to understand how property passes at death before deciding what estate planning they need.

Start with the property itself

Real estate and motor vehicles are examples of property for which ownership is ordinarily documented by a deed or certificate of title. If property is owned solely in a deceased person’s name, it may need to pass through probate, depending on the circumstances and applicable law. If the deceased person leaves a valid Will, that document generally directs the distribution of property subject to the Will. If there is no Will, state intestacy laws determine who inherits.

But there is another possibility. If property is held in joint tenancy with a right of survivorship, ownership generally passes automatically to the surviving joint owner. That transfer ordinarily occurs automatically by operation of the right of survivorship, outside probate.

Consider a married couple who own their home jointly with a right of survivorship.

When one spouse dies, the surviving spouse can generally establish sole ownership by recording an affidavit of death, accompanied by a certified copy of the death certificate, with the register of deeds in the county where the property is located. This same principle may apply to other property, including certain bank accounts. The important point is that the way property is owned can be just as important as whether a person has a Will.

What about children and other family members?

Suppose the surviving spouse later decides to arrange for the home or other property to pass to one or more children. There may be several ways to accomplish that objective, depending on the property and state law. Joint ownership is one possibility, but it is not necessarily the best one. Adding a child as a joint owner can have consequences that families may not anticipate. It can affect control over the property and expose the child’s interest to claims by the child’s creditors. It can also create complications if the child dies first or family circumstances change.

Other options, such as payable-on-death or transfer-on-death beneficiary designations, may be worth considering. South Dakota law allows an owner of real estate to sign and record a Transfer on Death (TOD) deed, which allows the property to pass to designated beneficiaries at death without going through probate.

The lesson is not that everyone should use joint tenancy. The lesson is to understand the options before deciding how property should pass.

Bank accounts, personal possessions

Bank accounts and other financial assets may pass directly to a surviving joint owner or to a designated beneficiary, depending on how the account is established. Assets without an effective survivorship arrangement or beneficiary designation may instead become part of the deceased person’s probate estate.

Furniture, family photographs, heirlooms, and other personal possessions may have substantial sentimental value even when their monetary value is modest. A Will can provide instructions for distributing these items. In some circumstances, family members may agree on their distribution without a formal probate proceeding. Whether probate is necessary, however, depends on the applicable law and the circumstances of the estate.

Life Insurance

Life insurance offers a valuable tool and typically avoids probate. Ordinarily, when a valid beneficiary designation is in place, the insurer pays the proceeds directly to the named beneficiary. There are exceptions, including situations in which the estate is designated as beneficiary or no effective beneficiary remains.

Other Considerations

A Will can serve important purposes beyond directing the distribution of property.

Parents of minor children may use a Will to nominate a guardian. A Will can establish a trust to manage property for children or other beneficiaries. It can also provide instructions for distributing property that remains in the probate estate.

Also, keep in mind that arrangements to avoid probate may not necessarily address other concerns, such as planning for incapacity during one’s lifetime.

My advice is straightforward: Take an inventory of what you own. Determine how each asset is titled, whether it has a beneficiary designation, and who will receive it when you die.

Consider your family circumstances and what you want to accomplish. Then consult a qualified estate-planning attorney to decide which legal documents and arrangements will best achieve those objectives.

Roger Baron is a guest columnist for the Rapid City Post. Opinions expressed may not necessarily represent the views of the Rapid City Post, its affiliates, or advertisers.

Note: In regard to the preparation of this week’s column, the author would like to thank Attorney Tina M. Hogue of Monument Law (Rapid City) and Attorney Stephen Wesolick of Aspen Legacy Planning (Rapid City), as well as Attorney Sarah Baron Houy and Claudia Baron for their assistance and input.

 

 

The views and opinions of this article may not reflect the views of The Rapid City Post, its affiliates, or advertisers.