Common Methods to Pass Assets so as to Avoid Probate
1. Beneficiary Designation Forms.
Life Insurance, IRA and pension plans, bank accounts, and stock brokerage accounts may all be passed at time of death if there is a written beneficiary form on file with the institution holding the assets. Insurance companies, IRA funds, pension funds, banks, and stock brokerage companies all have their own beneficiary designation forms to fill out.
Most common types of beneficiary designation forms:
- POD – Payable on Death to named beneficiary
- TOD – Transfer on Death to named beneficiary
Individuals and/or a Trust may be the named beneficiary.
2. Husband and Wife Marital Property Agreement and Asset Classification Agreement.
Wisconsin Law provides that a husband and wife may enter into the above Agreement as an Estate Planning tool to avoid probate (Agreement must be in writing). Wisconsin Laws dealing with Probate have been substantially revised to accommodate the above Agreement, by providing forms and procedures to pass assets at the time of death without the need for probate.
- Transfer by Affidavit – for transfer of assets of less than $50,000
- Form HT-110 – form to pass joint property and property held by last of husband and wife
- Non-Probate Petition and Dispositive Order (PR-1928 & PR-1929 – Petition for Summary Confirmation of Interest in Property; Certificate of Summary Confirmation of Interest in Property) – used in conjunction with above Marital Property Agreement – no probate, but requires paying of an Inventory filing fee to the County
3. Trusts – Revocable or Irrevocable.
The most common Trust used to pass ownership of assets is the Revocable Trust (i.e. can be revoked, amended, or changed during lifetime of Grantor).
Irrevocable Trusts used for income tax, gift tax, death/estate tax, and ownership divestment purposes – further discussion is beyond the scope of this explanation (for example, 5-year Irrevocable Asset Divestment Trust to avoid payment of nursing home/assisted living expenses).
Key to successful use of Revocable Trust to avoid probate – Trust must be funded during lifetime.
Methods of funding:
- Put asset into the actual name of the Trust
- Provide that the asset pass to the Revocable Trust at time of death by way of Beneficiary Designation Form discussed above.
Trusts give a decedent a method to pass assets confidentially.
4. Direct Gift/Transfer of ownership of asset by you during your lifetime to name of another person avoids probate.
5. Deeds dealing with transfers of Real Estate during your lifetime.
- Quit Claim Deed (for example) of real estate to children or third parties, with reservation of life estate use, and reserved power of appointment
- Transfer on Death Deed – Deed done now, but only passes the real estate if you still own the real estate at time of death – i.e. you can still sell the real estate during your lifetime
6. Probate Process – if actions are not taken to avoid it.
If a person dies with a Will or without a Will and leaves assets of greater value than $50,000.00, the decedent has left an Estate requiring probate.
Probate is time-consuming, may be expensive, and information on all of decedent’s assets are then on file at the Courthouse.