How to Avoid Probate With Trusts and Deeds

When a loved one passes away, the last thing the family needs is the added burden of a lengthy, costly, and public legal process to determine who inherits what. This process, known as probate, can tie up assets for months or even years, draining resources and adding stress to what’s likely already a difficult time. 

Fortunately, the best estate planning attorneys will tell you that careful planning is a powerful countermeasure to probate. 

Legal tools like trusts and deeds can facilitate a private, efficient, and direct transfer of wealth to an individual’s intended beneficiaries, bypassing the probate process entirely. 

This article delves into how probate works, why it can be beneficial to avoid it, and how certain deeds and trusts can be maximized to better secure your assets.

If you create a will before you die, it will dictate how your assets should be distributed upon your death; however, for those instructions to be carried out legally, the will typically needs to be validated by a court through a process known as probate. 

Think of a will as a set of instructions for the probate court to follow, rather than a way to bypass the probate process. Even if the decedent left a detailed will and trust, it’s up to the courts to decide:

• How their remaining debts are paid off; and

• How their remaining assets and possessions will be passed on.

These are usually routine matters, but routine or not, probate requires your loved ones to go to court.  This can be daunting for those unfamiliar with the court system and often results in the need to retain a probate attorney who can assist in navigating the probate process.  As a result, your loved ones are left having to find an attorney and incur those costs while trying to process and grieve their loss at the same time.  

Probate assets are possessions or property that do not have beneficiaries assigned to the asset itself. These types of assets can include:

• Motor vehicles

• Investment stocks

• Bank accounts

• Real estate 

• Personal valuables

Non-probate assets, on the other hand, often include property or assets with a designated beneficiary. In most cases, non-probate assets can bypass going through probate. These can include: 

• Life insurance proceeds

• Retirement plans

• Bank Accounts

• Pensions or annuities

• Assets in trust

Sometimes. Trusts are legal instruments that can be excellent for avoiding probate; however, it’s crucial to understand that not all trusts are the same. 

In fact, different types of trusts can be used in estate planning depending on one’s goals and circumstances.

Flexibility and Efficiency

People often opt for a revocable trust because it provides significant flexibility. As the grantor, you can change, terminate, or amend the terms of the trust.

A revocable trust simplifies asset distribution. Distribution can be accomplished in a few weeks, compared to months through probate court.

Does a Revocable Trust Avoid Probate and Promote Privacy?

Yes. Revocable trusts are a good option for those who want to keep details about their estate private, since assets become a matter of public record if they enter probate. 

Who Needs a Revocable Trust? 

Parents with Young Children

For parents with young children, a revocable living trust can be used to ensure their assets are used to provide for the children in the event of the parents' passing.  With a revocable trust, parents can designate who will be in charge of managing the trust assets for the benefit of the children.  Because the trust will not require probate, there will not be a delay in being able to provide for the children while waiting for the conclusion of a court process.

In addition to providing immediate financial support for the children, by setting up a revocable living trust, parents can also direct how they want their assets to be used as well as when certain funds should be distributed.  A revocable trust provides parents with flexibility to make changes if needed while having the peace of mind that, should something happen, their children will be financially supported in accordance with the parents’ wishes. 

A Person with Real Estate in Multiple States 

As a trust and estate planning attorney, I believe this is an ideal option, particularly if you hold assets such as real estate in multiple states. 

Without a revocable trust, your estate would likely be subjected to ancillary probate in each state where you own property upon your death. This means that in addition to the primary probate process in your state or residence, expensive probate proceedings would need to be opened in every state where you hold titled assets.  

Managing the local probate process is one thing. Navigating it in multiple states with different attorneys licensed in each state will be burdensome on your loved ones, especially when they are grieving your loss. A properly prepared revocable trust, however, can assist in avoiding this multi-state probate nightmare entirely. 

Transferring your out-of-state properties into a revocable trust during your lifetime consolidates them into a single plan, streamlining distribution and saving your family considerable time, expense, and stress.

A Person Living with a Long-Term Disability

A revocable trust can also be beneficial for managing your property and arranging for its care if you become incapacitated. 

When establishing a revocable living trust, most people name themselves the trustee and appoint their primary beneficiary as the successor trustee. Often, a spouse or adult child, the successor trustee, can immediately step in and manage your assets and affairs, avoiding a court-appointed guardianship or conservatorship. 

Note: The trust does not automatically revoke in divorce; you must change it to recognize a new successor trustee. Learn about estate planning after divorce in this article. 

The main difference between a revocable and an irrevocable trust is the ability to amend them. Once you place an asset in an irrevocable trust, that’s it. There’s no taking it out. 

Aging forces us to consider our preferences about long-term residential care. Unfortunately, many people don’t know their estate will be affected by nursing home care. Thus, they don’t plan for it. An irrevocable trust can be especially beneficial for individuals seeking access to Medicaid. 

A revocable trust will not protect your assets from nursing home costs. According to Colorado law, revocable trusts are still part of your estate and would be used to pay for nursing home care before Medicaid kicks in.

Here’s where an irrevocable trust becomes useful. Generally, irrevocable trusts aren’t considered part of your estate for Medicaid qualification purposes. You relinquish your right to assets placed into an irrevocable trust, protecting them from nursing home costs and allowing you to qualify for Medicaid sooner.  Of course, as with all things, there are exceptions and limitations. Because an irrevocable trust does not provide for immediate protection for purposes of Medicaid qualification, it is important to work with an attorney experienced in this area so that your trust is properly structured.

Establishing an irrevocable trust can be a strategic decision for a person of significant wealth to ensure responsible stewardship and longevity of their legacy. A meticulously structured irrevocable trust can protect the estate from potential future creditors and provide funding for healthcare, education, and entrepreneurial ventures. 

A thoughtful estate planning attorney can help you create a trust that will ensure your family’s prosperity extends across generations.

While trusts are a highly effective way to avoid probate, they may not be preferable to someone with limited assets, like a single home and a few bank accounts. In this case, I might suggest that my client consider creating a specialized deed that can bypass probate. 

Let’s explore some possible options:

Why Avoid Probate with a Beneficiary Deed?

This is a specific type of deed that states, upon your death, that if you still own the house and haven’t revoked the deed, it automatically goes to the named beneficiary. These arrangements allow the property to pass directly to the designated beneficiary upon your death, thus avoiding probate court. 

Learn more about protecting your heirs through a beneficiary deed in this blog post. 

A Payable-on-Death Account

You may also be able to bypass the probate process with a payable-on-death account. Because these accounts allow you to designate a beneficiary who will receive the funds directly upon your death, and are federally regulated, they don’t pass through probate court. 

Note: While non-probate transfers like payable-on-death accounts or beneficiary designations are generally not part of the probate estate, they may still be subject to liability for claims against the estate. Specifically, in cases where the estate’s value is insufficient to satisfy those claims. 

Avoid Co-Homeownership With Your Child 

Sometimes people title their property so that if one owner passes, their property interest immediately transfers to the other. This arrangement allows the property to pass directly to the surviving joint tenant. Some people add their child to the deed of their home, thinking it will simplify transferring their primary asset or make qualifying for Medicaid easier.

While this may sound like a reasonable way to bypass the probate process, it doesn’t simplify the transfer of property or avoid the delays and costs associated with probate the way you think. It can result in legal disputes and financial consequences if the property becomes subject to your child’s creditors. Additionally, the entire value of the property may still be included in your estate for estate tax purposes, depending on the terms of the transfer. 

Given the complexities and significant implications of estate planning decisions, the best way to navigate these choices and ensure your assets are protected and distributed according to your wishes is to work with an estate planning attorney.

My team can set you up for success by clarifying your options and tailoring your estate plan to reflect your unique circumstances. Together, we can help your loved ones avoid frustrating and protracted probate litigation. Call 303-688-0944 to begin your consultation.