Avoiding Probate through Non-Probate Transfers

Probate is the process by which a deceased person’s assets are transferred to his or her beneficiaries. Regardless of whether the person had a will, if the deceased person had assets in their name alone (or jointly owned with another person who is also deceased), those assets must go through probate.

Let me emphasize that again – even if you have a will, your assets can still go through probate! A will just tells the government where you want your assets to go, and who will administer that process for you (i.e. your “personal representative”).

As estate planning attorneys, we love trusts. They avoid probate, are flexible, are faster to distribute assets, generally cost less money than going through probate, and are a private document. However, a trust is not for everyone. For some people, a will paired with non-probate transfers will shield assets from probate.

Remember, an asset goes through probate if it is owned by the deceased person alone, or if an asset is jointly owned but no other owner is living (i.e. married couple owning a house, husband passes away then wife passes away).

Here’s a list of the most common types of non-probate transfers in Missouri:

  • Your house, vacation home, and some timeshares can avoid probate via a Beneficairy Deed. This means that when you die, your property passes to whoever you name on your deed, provided that this person/people are still alive when you pass.
    • After you pass, they will have to bring your death certificate and a Affidavit of Death of Grantor(s) to the Recorder of Deeds office to have it officially put in their name.
  • Your bank and financial accounts can have a Transfer on Death (TOD) or Payable on Death (POD) designation. Just tell your cashier or banker that you want to add a TOD to your account, and when you pass away, whoever you put on there will own the account. Banks may differ on whether they allow a TOD or a POD.
    • After you pass, they will have to bring your death certificate to have the account owned by them (TOD), or all of the assets in the account put into a cashier’s check in their name (POD).
    • Make sure you add everyone you want to have a share of the account as TOD. If you only put down one child, that one child will get all of it and have no obligation to share with anyone else.
    • We do not recommend putting a child or other relative down as a co-owner of the account – there are many pitfalls and legal problems this presents. Instead, only put them down as a TOD beneficiary.
  • Your car, boat, and trailer can avoid probate by having the title include a TOD designation. When you go to the DMV next, fill out a new Application for Missouri Title and License ($12) and check the TOD box. Write in the name of the person you want it to pass to. If you jointly own the car, you would TOD it to someone else in the contingency when both owners die. A car loan makes no difference.
    • After you pass, the person will have to bring the title and your death certificate to the DMV and fill out the paperwork there to have a new title issued in their name alone.
  • Your retirement account can avoid probate by ensuring that you have at least one beneficiary listed. Ideally, you would have multiple beneficiaries, including one at least a generation younger than you.
    • After you pass, they will contact the account holder and send in some paperwork and a death certificate for the funds to be distributed or rolled over. They should consult a financial advisor to ensure they make the best decision on how to handle the various options on how to withdraw the money, as there can be significant tax consequences.
  • Your life insurance policy proceeds can avoid probate so long as there is a living beneficiary listed. Ideally, you would have multiple beneficiaries, including one at least a generation younger than you.
    • After you pass, your beneficiaries would have to fill out some paperwork and send in a copy of your death certificate to receive the proceeds.

Some things, however, cannot easily avoid probate without more enhanced planning. For example, ownership interest in a company, some timeshares, old savings bonds, some types of securities, some oil and gas leases, and debts people may owe you (like you loaned a relative money).

One last thing to remember – nonprobate transfers are only effective after you die. If you become incapacitated, all of these non-probate transfers mean nothing since you are still alive. If you are injured or ill and someone needs to take care of your finances for you, you will need to have your assets in a trust and/or have a Durable Power of Attorney.