A simple way to avoid probate is to give away property during your lifetime. But there can be consequences because you lose control and cannot recover the item, cash or property just by asking. The new owner has to agree to return something to you or even use funds for your benefit. You should only give away what you can spare. Gifting over $15,000 per person in a year requires you to file a gift tax return with the IRS.
A second thing you can do is to make an asset payable on death. An example is life insurance, an IRA, a 401k, or an annuity. As long as you don’t name your estate or fail to name any beneficiary the property will pass outside of probate to the person you designate. You should name a contingent beneficiary in case the first person you select predeceases you.
Likewise you can use payable-on-death (POD) accounts. These are also sometimes called multiparty accounts. POD accounts do not provide the beneficiary with immediate access to your financial accounts, such as checking and savings accounts. The funds are given to the named beneficiary after you die. With a multiparty account the other person on the account can have immediate access while you are alive and after you die it belongs to the other person and does not pass thru probate. This can be a useful way for loved ones to have quick access to funds to pay for funeral expenses, last bills, and even support themselves.
Similar tools are called transfer on death (TOD) accounts used for stocks, bonds and other securities. Some states do not allow this form of designation, but South Carolina does.
Joint ownership with right of survivorship or a life estate are often used with real property, vehicles, and mobile homes to avoid probate. These types of ownership create various rights and limitations such as needing the other owner’s permission to mortgage the property or sell it. You need to understand the drawbacks before creating any changes to your real property. This change in title is a gift and subject to the five-year-look-back-period for Medicaid eligibility.
Living trusts have grown in popularity because they avoid probate and let you retain control as long as you are competent. These kinds of trusts can hold your real property in multiple states, including time shares. Said trusts can also hold household goods, vehicles, cash, accounts, etc. They can work in conjunction with some of ideas above.
Do not act on any of these ideas if you feel pressured by someone or are confused. You should consult with an elder law attorney well versed in Medicaid law before gifting away property and assets, changing your beneficiaries, or even creating a living trust.
Disclaimer: Information contained in this column is meant to be of general information on frequently asked questions concerning disability, elder law, estate planning and probate law, and does not contain specific legal advice to a client. No attorney-client relationship is created by reading this column.