Which Of The Following Is A Commonly Used Way To Avoid Probate?
Learn effective strategies to bypass the costly and lengthy probate process in Utah. Discover how revocable trusts, joint ownership, POD accounts, and more can help.
Which Of The Following Is A Commonly Used Way To Avoid Probate?
Navigating the complexities of estate planning can be daunting, especially when trying to avoid probate — a legal process that can often be lengthy and costly. If you live in Utah, understanding the laws and methods to bypass probate is essential. This article provides comprehensive information on commonly used ways to avoid probate, specifically tailored to Utah’s legal landscape. Utilizing real statutes and practical examples, we aim to empower you with the knowledge to make informed decisions.
Understanding Probate
Probate is a legal process that involves the validation and administration of a deceased person’s will. If there is no will, it entails distributing the deceased’s estate based on state laws. The probate process ensures that debts are paid and assets are distributed according to the decedent’s final wishes or the state’s intestacy laws if no will exists. However, probate can be time-consuming and expensive, which is why many seek ways to avoid it.
Why Avoid Probate?
Avoiding probate can save time, reduce court and attorney fees, and provide privacy, as probate proceedings are public records. Understanding the various methods to circumvent probate can significantly streamline the passing of assets to your beneficiaries.
Commonly Used Ways to Avoid Probate
There are several strategies to avoid probate, each with its own set of rules and applications. Here, we’ll discuss some of the most common methods used in Utah.
Creating a Revocable Living Trust
A revocable living trust is one of the most widely used methods to avoid probate. In Utah, when you create a revocable living trust, you transfer ownership of your assets to the trust while retaining control over them during your lifetime. Upon your death, the assets in the trust pass directly to the beneficiaries without going through probate.
How It Works
- Trust Creation: You (the grantor) create the trust document and transfer assets into the trust.
- Trustee Management: You can serve as the trustee, managing the assets during your lifetime.
- Beneficiary Distribution: Upon your death, a successor trustee distributes the assets to your beneficiaries as outlined in the trust document.
Legal Basis in Utah
According to Utah Code §75–7–101, the Utah Uniform Trust Code governs the creation and administration of trusts, providing a clear legal framework for setting up a revocable living trust.
Joint Ownership with Rights of Survivorship
Joint ownership allows you to own property along with another person, typically a spouse. Upon your death, the surviving owner automatically inherits the property, bypassing probate. There are several forms of joint ownership:
- Joint Tenancy with Rights of Survivorship: Common among spouses, this form avoids probate as long as one joint tenant remains alive.
- Tenancy by the Entirety: Only available to married couples, this form also provides automatic transfer of property upon the death of one spouse.
Legal Basis in Utah
Utah Code §57–1–5 outlines the rules for creating joint tenancy and tenancy by the entirety, ensuring legal clarity on property ownership and transfer.
Payable-on-Death (POD) Accounts
Payable-on-Death (POD) accounts allow you to designate beneficiaries to receive the funds in your bank accounts upon your death, without going through probate. These accounts are simple to set up and can include checking, savings, and certificate of deposit (CD) accounts.
How It Works
- Beneficiary Designation: You designate a beneficiary when creating the account or by filling out a POD form for existing accounts.
- Automatic Transfer: Upon your death, the bank transfers the funds directly to the designated beneficiary.
Legal Basis in Utah
Utah Code §75–6–101 governs non-probate transfers on death, including POD accounts, ensuring that these accounts meet legal requirements for bypassing probate.
Transfer-on-Death (TOD) Deeds
A Transfer-on-Death (TOD) deed allows you to name a beneficiary to inherit your real estate property upon your death. The property passes directly to the beneficiary without going through probate.
How It Works
- Beneficiary Designation: You create a TOD deed, naming the beneficiary and recording it with the county recorder.
- Automatic Transfer: Upon your death, the property transfers directly to the beneficiary without the need for probate.
Legal Basis in Utah
Utah Code §75–6–401 authorizes the use of TOD deeds for real property, providing a secure legal method to transfer real estate outside of probate.
Small Estate Affidavit
If the total value of your estate is relatively modest, Utah law allows for a simplified probate process using a Small Estate Affidavit. This process is for estates valued at $100,000 or less, excluding real estate.
How It Works
- Affidavit Creation: The beneficiaries create an affidavit stating their legal right to the assets.
- Asset Transfer: Financial institutions and other asset holders transfer the assets to the beneficiaries listed in the affidavit.
Legal Basis in Utah
Utah Code §75–3–1201 provides guidelines for using a Small Estate Affidavit, allowing a streamlined transfer of assets without formal probate for qualifying estates.
Real-World Application: Salt Lake County Scenario
Imagine you reside in Salt Lake County and wish to avoid probate for your estate. Here’s a practical scenario illustrating how these methods can be applied:
Scenario
John, a resident of Salt Lake County, wants to ensure that his estate is transferred to his children without the hassle of probate. John decides to use multiple methods to safeguard his estate:
- Revocable Living Trust: John establishes a revocable living trust, transferring his house and investment accounts into the trust.
- Joint Ownership: John and his wife hold their joint bank account as Joint Tenants with Rights of Survivorship.
- POD Accounts: John sets up POD designations on his savings and checking accounts, naming his children as beneficiaries.
- TOD Deed: John records a TOD deed for his vacation property in Park City, naming his eldest child as the beneficiary.
- Small Estate Affidavit: John ensures his smaller assets qualify for transfer under Utah’s Small Estate Affidavit provision.
By utilizing these strategies, John successfully arranges his affairs to avoid probate and ensures a seamless transfer of his assets to his loved ones.
Common Misconceptions About Avoiding Probate
Myth 1: Believing a Will Alone Avoids Probate
Many people mistakenly believe that having a will avoids probate. While a will is essential in guiding how your estate should be distributed, it does not avoid probate. A will must still be validated and administered through the probate process.
Myth 2: Joint Ownership Always Avoids Probate
While joint ownership with rights of survivorship can avoid probate for jointly held assets, if the joint owner predeceases you or if you hold the property as tenants in common, probate may still be required.
Myth 3: Only Large Estates Need to Avoid Probate
Even smaller estates can benefit from avoiding probate. Using methods like the Small Estate Affidavit can streamline the process and minimize legal entanglements.
Practical Implications: Why It Matters
Understanding how to avoid probate has significant practical implications. It not only saves time and money but also ensures that your estate is distributed as per your wishes without public scrutiny. Here are a few reasons why it matters:
- Privacy: Avoiding probate keeps your financial affairs private, as probate cases are public records.
- Efficiency: Probate can take months or even years. Methods to avoid probate allow for quicker distribution to your beneficiaries.
- Cost Savings: Avoiding probate reduces legal and administrative fees, preserving more of your estate for your beneficiaries.
- Control: While alive, you maintain control over your assets, with clear plans for their distribution upon your death.
Frequently Asked Questions
1. Can a joint tenancy property be challenged in probate court in Utah?
In general, property held as joint tenancy with rights of survivorship avoids probate. However, if there are disputes among potential heirs or claims against the estate, issues could potentially be addressed in probate court.
2. How does a revocable trust work in Salt Lake City?
A revocable trust in Salt Lake City works by transferring your assets into the trust during your lifetime. You retain control as the trustee and the successor trustee manages the assets upon your death, distributing them to the named beneficiaries without probate.
3. Are TOD deeds valid for commercial properties in Utah?
Yes, Transfer-on-Death (TOD) deeds can be used for commercial properties in Utah, provided they are recorded properly and meet all legal requirements.
4. Is a Small Estate Affidavit sufficient for real estate transfers in Utah?
No, a Small Estate Affidavit in Utah is not applicable for real estate transfers. It is intended for personal property and financial assets within the $100,000 limit.
5. What happens if a beneficiary predeceases me on a POD account?
If a beneficiary predeceases you on a Payable-on-Death (POD) account, the funds typically revert back to your estate and may need to go through probate unless you have a contingent beneficiary named.
Conclusion
Avoiding probate in Utah is not only feasible but also prudent to ensure a smooth transfer of your assets to your beneficiaries. By utilizing methods such as revocable living trusts, joint ownership, payable-on-death accounts, transfer-on-death deeds, and small estate affidavits, you can efficiently bypass the probate process. This knowledge empowers you to make sound estate planning decisions, maintaining control and ensuring your wishes are honored.
To speak with a probate lawyer, call attorney Jeremy Eveland at (801) 613–1472.
For more helpful information on estate planning and probate, be sure to clap this article, leave a comment, and subscribe to our Medium newsletter for updates. Jeremy Eveland 8833 S Redwood Rd West Jordan Utah 84088 (801) 613–1472
The information contained in this article is for information purposes only and is not legal advice. For legal advice, hire a competent lawyer in your jurisdiction.
