Some methods of probate avoidance have pitfalls themselves to be avoided.
In our first primer we discussed assets that will not be subject to probate because they were no longer titled to the deceased person, or were automatically retitled upon the person’s death. Basically, then, probate avoidance requires the titling assets in one of those manners. However, some of these methods have their own pitfalls:
- Assets with a TOD (Transfer on Death) or POD (Pay on Death) beneficiary designation. The drawback of using this method is that if the death beneficiary predeceases the owner and no further beneficiary designation is made, for example by oversight or because the owner is incapacitated, the asset goes to the owner’s estate, resulting in a probate or estate administration.
- Assets titled as tenants by the entireties (husband and wife). Same as above.
- Other assets with an individual beneficiary designation, such as retirement accounts or life insurance policies. Same as above.
- Assets titled as joint tenants with right of survivorship. Same as above, plus the asset could be subject to the claims of creditors of the joint owner.
- Homestead, where the property is left to natural heirs. The drawback of relying on homestead status to avoid probate is that a determination of homestead must be made by a court, requiring legal proceedings.
- Life estate deeds. Perhaps the most dangerous method of probate avoidance, this creates an irrevocable interest in the remainder beneficiary or his or her estate. Thus, to convey the property during lifetime will require the signature of the remainder beneficiary, which might not be forthcoming. And if the reminder beneficiary dies before the owner, then the reminder interest goes through the beneficiary’s estate to his or her own beneficiaries, perhaps producing consequences unanticipated to the owner.
- Assets titled to a living trust. This method suffers from none of the above drawbacks. A living trust merits its own discussion and will be discussed in a future primer.
Copyright 2012, The Law Office of Vincent J. Profaci, P.A., serving Altamonte Springs, Kissimmee, Lake Mary (including Heathrow), Longwood (including Lake Brantley and Sweetwater), Maitland, Orlando, Sanford, and all of Central Florida in the areas of Wills and Living Trusts, Estate Planning, Asset Protection, Elder Law, Medicaid Planning, Probate, Real Estate, and Business Law and Litigation.