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How To Avoid Probate (Will Substitutes)

Assets That Pass By Contract

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Some property can pass directly to your heirs by naming the heir in a contract type situation. Even though the assets pass directly to your heirs, the money is included in your estate for estate tax purposes. Such assets include:

Payable on Death Accounts For Bank Accounts

You can pass title immediately to your heir by registering your bank account as a "payable on death account." In this type of account:

  • You control the money while you are alive.
  • Whatever is in the account when you die automatically passes to your beneficiary. All your beneficiary has to do is show up at the bank with identification and a copy of your death certificate and ask for the money.
  • No probate is necessary.

Totten Trusts for Savings Accounts

Totten Trusts are the name given to "Payable On Death Accounts" when used with a savings bank account and certificates of deposit.

  • Usually only one beneficiary can be named per account.
  • All that is necessary to establish a Totten Trust is a signature card at the bank. There is no formal document to create like with a trust.
  • There is no cost to the account holder for setting up a Totten Trust.

Transfer on Death Stock and Bond Accounts

The Uniform Transfer-on-Death Security Act allows you to transfer stocks and bonds to other people upon your death.

  • The process is very simple: just ask your broker or mutual fund company for the form used to designate the name of the person you want to inherit the securities after your death.
  • When the time comes, your named beneficiaries can claim the securities directly from your broker or investment company with i.d. and a copy of the death certificate.
  • Transfer on Death forms are legal in every state except Louisiana and Texas.

Transfer-on-Death for Vehicles

If you live in Connecticut, Kansas, Missouri or California, you can also register your car with a transfer-on-death designation. Even if you don't live in one of these states, it might be worth checking with your Department of Motor Vehicles, since more states are expected to adopt this law over time. (In your favorite search engine, type "Department of Motor Vehicles + The Name Of Your State").

  • The process simply involves paying a small fee and filling out a form provided by the Department of Motor Vehicles with the name of the person to whom you want to leave the vehicle.

Retirement Plan Beneficiaries

You can name a beneficiary for most of your retirement accounts, including IRAs and employer plans.

  • Your beneficiary will automatically inherit the funds left in your account at your death.
  • If you name your estate as the beneficiary, the assets will instead be distributed according to your Will.

Visit our Retirement Planning section to learn more about distributions upon the death of a retirement plan account holder.

Life Insurance Beneficiaries

Money paid to a beneficiary of a life insurance policy also avoids probate, unless you designate your estate as the beneficiary.

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