How to avoid probate — strategies that actually work

This article is for educational purposes only and does not constitute medical, legal, or financial advice. Every family situation is different, and you should consult with appropriate professionals about your specific circumstances.

Your parents got tired of hearing about how expensive and time-consuming probate is. They wanted to avoid it. They researched online and found all kinds of strategies. Some seemed reasonable. Some seemed too complicated. They asked an attorney which ones actually work. The attorney explained that some strategies are legitimate. Some are scams. Some cost more than they save. Not all probate-avoidance strategies are worth the effort.

There are legitimate ways to avoid probate. But there are also a lot of people who sell probate-avoidance services that are either ineffective or cost more than they save. Understanding which strategies actually work helps your parent decide what makes sense for their situation.

Probate avoidance makes sense for many families, especially families with significant assets. But the strategy you choose needs to actually work and needs to make financial sense. Not every probate-avoidance strategy is right for every situation.

Understanding the Basics

The basic concept of probate avoidance is simple: property that's not in your parent's sole name doesn't go through probate. The question is how to structure property so it's not in your parent's sole name at the time of death.

Different strategies accomplish this. Some require your parent to transfer property during their lifetime. Some require your parent to set up beneficiary designations. Some require your parent to set up property jointly. Different strategies work for different types of property.

The key requirement is that the strategy has to actually be legal and effective in your state. Some strategies that work in one state don't work in another. Some strategies require specific legal structures or specific documentation. Getting it right is important because if it's not done properly, the property might still go through probate anyway.

Most probate-avoidance strategies need to be set up before your parent dies. You can't wait until your parent is on their deathbed to avoid probate. Your parent needs to set things up while they have capacity.

Legitimate Strategies

A revocable living trust is probably the most comprehensive probate-avoidance strategy. Your parent creates a trust, transfers property into the trust during their lifetime, and when your parent dies, the property in the trust is distributed according to the trust's directions without probate. This works and is legitimate. It requires some upfront work and some cost, but for the right family, it's effective.

Beneficiary designations are straightforward and effective. Life insurance, retirement accounts, and bank accounts can have beneficiary designations. Property passes directly to the beneficiary without probate. This is not only legitimate, it's encouraged. Make sure your parent has updated beneficiary designations on every account that allows them.

Joint ownership with right of survivorship can work for property. When property is owned jointly with someone and one owner dies, the property automatically passes to the surviving owner. This avoids probate. It's effective, but it has implications. If you own property jointly with your parent and your parent dies, you'll own the property. If you own property jointly with your parent and you die, your parent will own the property. This might be what you want, or it might not be. It depends on your situation.

Tenancy by the entireties is a form of joint ownership available to married couples in some states. It has similar effects to joint ownership, but with some specific legal protections.

Transfer on death deeds are available in some states for real property. Your parent can record a deed that says the property transfers to a named person when your parent dies. The property isn't in the other person's name while your parent is living, but transfers automatically when your parent dies. This is effective in states that allow it.

Payable on death accounts and transfer on death accounts are similar. Your parent can register a bank account or investment account as payable on death to someone. When your parent dies, the account transfers to that person without probate. This is easy to set up and costs nothing.

Small estate procedures exist in many states for estates below a certain amount. If your parent's estate is small enough, it might qualify for a simplified process that avoids full probate. The amount varies by state, but many states have some form of this.

Gifts during lifetime can reduce the size of your parent's estate, which means less property goes through probate. Your parent can gift money to family members during their lifetime. This reduces the estate size. There are tax implications and annual limits to be aware of, but gifting during lifetime is a legitimate strategy that some families use.

Strategies That Might Not Work

Living probate-avoidance companies often advertise living trusts as a miraculous solution that will save money and time. Some of these services are legitimate and effective. Some are overpriced. Some set up trusts that don't get funded properly (assets aren't actually transferred into the trust), which means the trust doesn't accomplish anything. Make sure that if your parent creates a trust, the assets actually get transferred into it.

Some probate-avoidance scams exist. Some schemes promise to avoid probate through strategies that don't actually work. Some promise tax benefits that don't exist. Some charge fees that far exceed the value of what they're offering. Be cautious about services that seem too good to be true or charge surprising amounts of money.

Some strategies that people think avoid probate actually don't. Making someone a joint owner just to avoid probate can create problems. If your parent adds you as joint owner of the bank account to avoid probate, the account might still go through probate if you die before your parent. Creating joint ownership can create unintended tax consequences. It's not always the right strategy.

Some strategies work for one type of property but not for another. A strategy that works for a house might not work for a bank account. A strategy that works in one state might not work in another. Understanding what works for your parent's specific situation and specific property is important.

Your Parent's Specific Situation

Start by assessing what property needs to be dealt with. What assets does your parent have? How much is in your parent's sole name? How much already has beneficiary designations? How much is in joint ownership? What property is in trusts or already structured to avoid probate?

Assess how much of your parent's property will go through probate. If your parent's property is mostly already structured to avoid probate (retirement accounts with beneficiaries, bank accounts with payable-on-death designations, property held jointly), then probate avoidance might already be largely accomplished. If most of your parent's property is in their sole name, then probate is likely and considering strategies might make sense.

Assess what will probate cost if your parent dies. This depends on your state and on the complexity and size of the estate. An attorney can give you a rough estimate. Compare that cost to the cost of implementing a probate-avoidance strategy. If the cost of implementing a strategy is more than the cost of probate, the strategy might not be worth it.

Consider your parent's family situation. Is the family straightforward, or are there complications? Will your parent's property transfer smoothly with beneficiary designations, or does your parent need something more sophisticated? Does your parent have a desire for privacy? These factors affect what strategy makes sense.

Consider your parent's timeline. If your parent is young and healthy, there's less urgency. If your parent is older or has health issues, setting up strategies sooner rather than later is better.

Taking Next Steps

Meet with an estate attorney. The attorney can assess your parent's situation and advise on what probate-avoidance strategies make sense. The attorney can calculate rough probate costs and compare them to the cost of implementing strategies.

If beneficiary designations make sense, update them. Review your parent's life insurance, retirement accounts, bank accounts. Make sure beneficiary designations are in place and are accurate. This is often free or low-cost and can avoid probate for significant assets.

If a trust makes sense, work with an attorney to set up a trust. Once the trust is created, make sure to transfer property into it. This is the important step that people sometimes skip. The trust only works for property in the trust's name.

If joint ownership makes sense for some property, set it up properly. But understand the implications. Joint ownership affects what happens to the property if you die. It might affect creditor claims. It might affect tax treatment. Make sure you understand the implications before you set it up.

Make a plan based on your parent's specific situation. Some families benefit from comprehensive probate avoidance planning. Some families don't need it. What matters is making a decision based on your parent's actual situation and actual assets, not based on marketing hype or fear.

This is one of those planning areas where there are legitimate options that work and illegitimate options that don't. Working with a competent attorney helps you identify strategies that actually work for your parent's situation and avoid strategies that don't. The goal is to set up your parent's affairs in a way that accomplishes what your parent wants—managing assets effectively while living and passing them smoothly after death—not to implement complex strategies that don't actually accomplish anything.

How To Help Your Elders is an educational resource. We do not provide medical, legal, or financial advice. The information in this article is general in nature and may not apply to your specific situation. If you are concerned about a loved one's cognitive health or safety, consult with their healthcare provider or contact your local Area Agency on Aging for guidance and support.