What is Probate Avoidance?

Avoiding probate means setting up the ownership of your assets in a manner that makes it unnecessary to commence proceedings in the Probate and Family Court upon your death. Some assets by their nature avoid probate. These "non-probate" assets include:

• Assets owned as joint tenants with right of survivorship. This form of joint ownership between two or more individuals results in the surviving owner or owners automatically becoming the owner of the deceased owner's share of the property.  For example, a stock certificate held in two names "JROS" or as joint tenants; or the deed to real estate indicating that ownership is as joint tenants or as joint tenants with right of survivorship.  Another form of joint ownership is tenants-in-common.  This form of joint ownership does not result in the deceased owner's share passing automatically to the surviving owner.  Instead, the deceased owner's share is part of his or her probate estate.

• Assets held as tenants by the entirety.  This is a form of joint ownership between a married couple.  Neither one of them can terminate the joint ownership without the consent of the other.  When one dies, the survivor automatically becomes the sole owner of the property.

• Assets that pass by beneficiary designation such as retirement accounts, life insurance, and Transfer on Death (“TOD”) mutual fund and brokerage accounts.  The term TOD is an abbreviation referring to the Massachusetts Uniform Transfer on Death Securities Registration Act.

• Assets held in a revocable or irrevocable living trust.

• Assets held in a nominee trust depending on the provisions of the schedule of beneficial interests.

• Assets held as a life estate with a remainder interest. For example, a deed of real estate from a mother to her daughter transferring ownership into the daughter's name, but expressly reserving a life estate for the mother.

What are some of the factors to consider when changing ownership of property to avoid probate?

Some factors to consider are:

Are you willing to give up all or some portion of the ownership and/or control of the asset? Are you willing to accept the risks of giving assets away or adding a co-owner? How would you feel if someone brings a lawsuit against the recipient of your gift and obtains a court judgment to seize the property? This could include a judgment issued in a divorce action. What if the recipient of the gift will not give the asset back to you if you change your mind? What if you decide you would prefer to leave the asset to someone else after your death? Are there favorable or unfavorable tax consequences of a gift? For example, see Stepped-up Tax Basis. Are the favorable or unfavorable creditor protection aspects for you as well as for the recipient? This could include an analysis of whether or not the gifted asset would be counted as an asset for purposes of MassHealth.