How to Avoid Probate
Prepare to name a beneficiary upon death., Understand the difference between TOD and POD., Select anyone you would like to be a beneficiary., Establish a TOD for your vehicle(s) at the Department of Motor Vehicles., At the DMV, apply for a...
Step-by-Step Guide
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Step 1: Prepare to name a beneficiary upon death.
Property that lists a transfer on death beneficiary (TOD) or a pay on death beneficiary (POD) passes directly to the named beneficiary, avoiding probate.
Under a POD or TOD arrangement, the property is automatically passed to the beneficiary upon the death of the original owner.
This is unlike a will.
With a will, property ownership does not change until the probate process is completed and the executor of the estate distributes the property to beneficiaries. -
Step 2: Understand the difference between TOD and POD.
The two terms are very similar, but differ in the type of account each applies to.
Although they are essentially the same, they are used in different circumstances.TOD applies to property that you own.
That property (such as real estate or a car) will be transferred at your death to the named beneficiary who can then do with it what they would like.
POD applies to money and bank accounts.
Money is still considered “property,” but a bank account in your name will not remain open as such after your death.
Therefore, the account is “paid” out after your death to your beneficiary of choice, who can then do what they want with the money.
However, the bank account must be closed. , You may name anyone you choose as a TOD or POD on your financial accounts, vehicle titles, and in some states, your real property.
When property passes to a joint owner, TOD, or POD, it passes outside of your estate.
Your estate consists of all other property, not jointly owned or listing a TOD or POD.
To avoid probate, you must ensure that all of your property passes outside of your estate, directly to a beneficiary or joint owner. , Some states will allow you to name a TOD beneficiary for your car.
This is beneficial because then the car can be automatically transferred to the new owner instead of sitting unused during the probate process., (The fee is the same as for a standard certificate.) The new certificate lists the name of the beneficiary (or more than one), who will automatically own the vehicle after your death.
The beneficiary you name has no rights as long as you are alive.
You are free to sell or give away the car, or name someone else as the beneficiary.
You can find out if your state allows TOD beneficiaries for cars here. , You may do this by visiting the bank and filling out a simple form.
Banks will all have slightly different procedures for this, and it may be a good idea to call ahead and ask before you visit in person.
If you are naming a joint owner, the person you are naming will need to be present and sign a signature card to be added to the account.A simpler way to manage your bank accounts may be to establish a joint account.
With a joint account, if one party dies, the other simply becomes the "owner" of the account and can continue operating the account without any legal formalities.
However, keep in mind that naming a joint account owner instead of a POD beneficiary can cause problems.
For example, a joint owner can withdraw all your money or cause a lien to be placed on the account if they are sued and a judgment is entered against them.
Naming a joint owner can also cause you to be responsible for federal gift taxes.
Currently, you may gift up to $13,000 to any one person without owing a federal gift tax.
Naming a POD or TOD is the safest way to ensure that your property passes to whom you wish, without giving them any interest in it until after your death.
Most states allow a POD beneficiary to take over an account without probate if a will gives you a right to the money and the sum in the account does not exceed a certain amount.
In such a case, you need to provide the bank with a copy of the death certificate, the will and a declaration. , If you use a brokerage firm, they should be able to provide you with the form to list the beneficiary of your choice.Most states have adopted the Uniform Transfer-on-Death Securities Registration Act, which permits TOD designation for investment securities.You can find out if your state has adopted this act here. , Real property includes both residential and commercial real estate.
Some states allow transfer on death deeds and others do not.A transfer on death deed is just like a normal quit claim or warranty deed that transfers property to a new owner.
The transfer on death deed, however, names the new owner and the TOD.
Check with a local title company or real estate attorney in order to determine if your state allows TOD deeds.
If your state does not allow transfer on death deeds, you can always name a joint owner for each piece of real estate that you own. , If property is subject to “joint tenancy,” co-owners have equal ownership of a property that passes upon the death of one party to the surviving owner(s) by right of "survivorship." Another type of joint tenancy is “tenancy in common,” which entitles owners to predetermined shares of the property and allows the portion owned by the deceased to pass in accordance with his will.
Survivorship is not automatic, so make sure that your deed specifies that the joint ownership has a right of survivorship.
Once one of the owners of the property dies, the surviving owner must provide evidence of the death of the other party (death certificate) and complete a formal declaration setting out the basis for their entitlement.
Be sure to consult an attorney about how best to transfer property to heirs or owners with survivorship.
You may also want to talk to your attorney or an accountant about tax implications of inheriting or receiving sole ownership of a property. -
Step 3: Select anyone you would like to be a beneficiary.
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Step 4: Establish a TOD for your vehicle(s) at the Department of Motor Vehicles.
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Step 5: At the DMV
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Step 6: apply for a certificate of car ownership in "beneficiary form."
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Step 7: Name a TOD or POD on your checking and savings accounts.
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Step 8: List a TOD or POD on any annuities
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Step 9: retirement savings
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Step 10: or other investments that you have.
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Step 11: Discuss naming a TOD on any real property that you own with an attorney.
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Step 12: Understand joint ownership of real property.
Detailed Guide
Property that lists a transfer on death beneficiary (TOD) or a pay on death beneficiary (POD) passes directly to the named beneficiary, avoiding probate.
Under a POD or TOD arrangement, the property is automatically passed to the beneficiary upon the death of the original owner.
This is unlike a will.
With a will, property ownership does not change until the probate process is completed and the executor of the estate distributes the property to beneficiaries.
The two terms are very similar, but differ in the type of account each applies to.
Although they are essentially the same, they are used in different circumstances.TOD applies to property that you own.
That property (such as real estate or a car) will be transferred at your death to the named beneficiary who can then do with it what they would like.
POD applies to money and bank accounts.
Money is still considered “property,” but a bank account in your name will not remain open as such after your death.
Therefore, the account is “paid” out after your death to your beneficiary of choice, who can then do what they want with the money.
However, the bank account must be closed. , You may name anyone you choose as a TOD or POD on your financial accounts, vehicle titles, and in some states, your real property.
When property passes to a joint owner, TOD, or POD, it passes outside of your estate.
Your estate consists of all other property, not jointly owned or listing a TOD or POD.
To avoid probate, you must ensure that all of your property passes outside of your estate, directly to a beneficiary or joint owner. , Some states will allow you to name a TOD beneficiary for your car.
This is beneficial because then the car can be automatically transferred to the new owner instead of sitting unused during the probate process., (The fee is the same as for a standard certificate.) The new certificate lists the name of the beneficiary (or more than one), who will automatically own the vehicle after your death.
The beneficiary you name has no rights as long as you are alive.
You are free to sell or give away the car, or name someone else as the beneficiary.
You can find out if your state allows TOD beneficiaries for cars here. , You may do this by visiting the bank and filling out a simple form.
Banks will all have slightly different procedures for this, and it may be a good idea to call ahead and ask before you visit in person.
If you are naming a joint owner, the person you are naming will need to be present and sign a signature card to be added to the account.A simpler way to manage your bank accounts may be to establish a joint account.
With a joint account, if one party dies, the other simply becomes the "owner" of the account and can continue operating the account without any legal formalities.
However, keep in mind that naming a joint account owner instead of a POD beneficiary can cause problems.
For example, a joint owner can withdraw all your money or cause a lien to be placed on the account if they are sued and a judgment is entered against them.
Naming a joint owner can also cause you to be responsible for federal gift taxes.
Currently, you may gift up to $13,000 to any one person without owing a federal gift tax.
Naming a POD or TOD is the safest way to ensure that your property passes to whom you wish, without giving them any interest in it until after your death.
Most states allow a POD beneficiary to take over an account without probate if a will gives you a right to the money and the sum in the account does not exceed a certain amount.
In such a case, you need to provide the bank with a copy of the death certificate, the will and a declaration. , If you use a brokerage firm, they should be able to provide you with the form to list the beneficiary of your choice.Most states have adopted the Uniform Transfer-on-Death Securities Registration Act, which permits TOD designation for investment securities.You can find out if your state has adopted this act here. , Real property includes both residential and commercial real estate.
Some states allow transfer on death deeds and others do not.A transfer on death deed is just like a normal quit claim or warranty deed that transfers property to a new owner.
The transfer on death deed, however, names the new owner and the TOD.
Check with a local title company or real estate attorney in order to determine if your state allows TOD deeds.
If your state does not allow transfer on death deeds, you can always name a joint owner for each piece of real estate that you own. , If property is subject to “joint tenancy,” co-owners have equal ownership of a property that passes upon the death of one party to the surviving owner(s) by right of "survivorship." Another type of joint tenancy is “tenancy in common,” which entitles owners to predetermined shares of the property and allows the portion owned by the deceased to pass in accordance with his will.
Survivorship is not automatic, so make sure that your deed specifies that the joint ownership has a right of survivorship.
Once one of the owners of the property dies, the surviving owner must provide evidence of the death of the other party (death certificate) and complete a formal declaration setting out the basis for their entitlement.
Be sure to consult an attorney about how best to transfer property to heirs or owners with survivorship.
You may also want to talk to your attorney or an accountant about tax implications of inheriting or receiving sole ownership of a property.
About the Author
Julie Castillo
A passionate writer with expertise in crafts topics. Loves sharing practical knowledge.
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