Avoiding Probate 12 th Edition Mary Randolph, J.D.
Introduction Thinking About Probate Avoidance... 1 Learning Objectives... 1 Introduction... 1 Is It Worth Your While to Avoid Probate?... 1 What Probate Avoidance Can t Change... 3 Taxes... 3 Your Family s Right to Inherit... 3 Your Creditors Rights... 4 Comparing Probate-Avoidance Methods... 5 A Lick of Common Sense... 6 Review Questions... 7 Review Answers... 8 Chapter 1 Set Up Payable-on-Death Accounts... 9 Learning Objectives... 9 Introduction... 9 The Paperwork... 10 Adding a POD Designation to a Joint Account... 10 Accounts With a Right of Survivorship... 10 Accounts With No Right of Survivorship... 11 Choosing Beneficiaries... 11 Children... 12 Multiple Beneficiaries... 13 Institutions or Businesses... 14 Your Spouse s Rights... 14 Spouses Rights in Community Property States... 14 Spouses Rights in Noncommunity Property States... 15 If a Beneficiary Dies Before You Do... 15 If You Change Your Mind... 16 How to Change a POD Designation... 16 Contradictory Will Provisions... 16 Property Settlement Agreements at Divorce... 17 Claiming the Money... 17 Review Questions... 18 Review Answers... 19 Chapter 2 Name a Beneficiary for Your Retirement Accounts... 21 Learning Objectives... 21 Introduction... 21 Choosing a Beneficiary... 22 Special Rules If You re Married or Divorced... 22 Naming Your Spouse... 23 Naming an Adult Other Than Your Spouse... 24 Naming Minor Children... 25 Naming More Than One Beneficiary... 26 Naming Your Estate... 26 Naming a Trust... 26 Naming a Charity or Another Organization... 26 Choosing Alternate Beneficiaries... 27 Required Minimum Distributions From Retirement Accounts... 27 When Distributions Must Begin... 27 Calculating the Required Minimum Distribution... 28 Why You Don t Want to Miss a Required Distribution... 29 Review Questions... 30 Review Answers... 31
Chapter 3 Name a Beneficiary for Stocks and Bonds... 33 Learning Objectives... 33 Introduction... 33 Transfer-on-Death Registration... 33 Who Can Use the Law... 34 How It Works... 34 Joint Accounts... 35 Your Spouse s Rights... 35 Naming Children as Beneficiaries... 36 Naming More Than One TOD Beneficiary... 36 If a Beneficiary Dies Before You Do... 36 If You Change Your Mind... 37 When Not to Use TOD Registration... 37 Claiming the Securities... 37 Registration of Government Bonds and Notes... 37 Review Questions... 39 Review Answers... 41 Chapter 4 Name a Beneficiary for Your Vehicles... 43 Learning Objectives... 43 Introduction... 43 Transfer-On-Death Registration... 43 How It Works... 43 If You Change Your Mind... 44 Transferring Title After Death... 44 Joint Ownership With the Right of Survivorship... 45 Special Transfer Procedures for Vehicles... 45 Review Questions... 48 Review Answers... 49 Chapter 5 Name a Beneficiary for Your Real Estate... 51 Learning Objectives... 51 Introduction... 51 Can You Use a TOD Deed?... 51 How It Works: An Overview... 52 Possible Drawbacks of TOD Deeds... 52 Effect on Medicaid Eligibility... 52 No Quick Sale After Death... 53 How to Prepare, Sign, and Record the Deed... 53 Get a Deed Form or Prepare Your Own... 53 Name the Beneficiary... 53 Describe the Property... 53 Sign the Deed... 53 Record the Deed... 54 Three Ways to Cancel the Deed And One Way Not To... 56 Record a Revocation... 56 Record a New TOD Deed... 56 Transfer the Property to Someone Else... 56 How the New Owner Claims the Property... 57 Review Questions... 58 Review Answers... 59 Chapter 6 Hold Property in Joint Ownership... 61 Learning Objectives... 61 Introduction... 61 Kinds of Joint Ownership That Avoid Probate... 61 Joint Tenancy... 62 How Joint Tenancy Avoids Probate... 63 ii
Joint Tenancy and Debts... 63 Limitations of Joint Tenancy... 64 Drawbacks of Adding a New Joint Tenant Just to Avoid Probate... 64 How to Take Title in Joint Tenancy... 66 Tenancy by the Entirety... 67 Community Property... 68 Community Property Basics... 69 Community Property With the Right of Survivorship... 69 Community Property Agreements... 71 Regular Community Property... 72 Alternatives to Joint Ownership... 73 Review Questions... 74 Review Answers... 76 Chapter 7 Create a Living Trust... 79 Learning Objectives... 79 Introduction... 79 How a Living Trust Avoids Probate... 80 Trust Basics... 80 Who s in Charge... 80 How Property Is Transferred After Your Death... 80 Other Advantages of a Living Trust... 81 Protection From Court Challenges... 81 Avoiding a Conservatorship... 82 Why You Still Need a Will... 83 Do You Really Need a Living Trust?... 83 Your Age and Health... 83 Where You Live... 83 Your Family... 83 How Much You Own... 84 What Kind of Assets You Own... 84 How Much You Owe... 84 Creating a Valid Living Trust... 84 Writing the Trust Document... 85 Choosing a Successor Trustee... 85 Leaving Trust Property to Young Beneficiaries... 86 Transferring Property to the Trust... 87 What Property to Put in a Trust... 88 Real Estate... 89 Small Business Interests... 89 Bank Accounts... 90 Individual Retirement Accounts... 90 Vehicles... 90 Property You Buy or Sell Frequently... 90 Life Insurance... 90 Securities... 91 Cash... 91 Taxes and Record Keeping... 91 Amending or Revoking a Living Trust Document... 92 Review Questions... 93 Review Answers... 95 Chapter 8 Take Advantage of Special Procedures for Small Estates... 99 Learning Objectives... 99 Introduction... 99 Why Even Large Estates May Qualify... 99 Which Assets Are Counted... 100 Subtracting What You Owe on Property... 100 iii
If There s No Dollar Limit... 100 Using These Rules to Plan... 101 Claiming Wages With an Affidavit... 101 Claiming Other Assets With Affidavits... 102 Simplified Court Procedures... 104 An Overview... 104 Is a Lawyer Necessary?... 105 State Rules... 105 Review Questions... 106 Review Answers... 107 Chapter 9 Make Gifts... 109 Learning Objectives... 109 Introduction... 109 The Federal Gift Tax... 109 Making Tax-Free Gifts... 110 Gifts of Up to the Annual Exclusion Amount... 110 Gifts for Tuition or Medical Bills... 111 Gifts to Your Spouse... 111 Gifts to Charities... 112 Gifts That Could Land You in Tax Trouble... 112 Loans That Are Really Gifts... 112 Gifts Made to One Person but Intended for Another... 113 Gifts With Strings Attached... 113 What to Give... 113 Property That Is Likely to Increase in Value... 113 Property That Has Increased in Value... 114 Gifts to Children... 114 Who Will Manage the Property?... 114 Special Gift Tax Rules... 115 Income Tax Considerations... 115 Thinking Before You Give... 115 Review Questions... 116 Review Answers... 118 Chapter 10 Putting It All Together... 121 Learning Objectives... 121 Introduction... 121 Alice and Frank: A Simple Life... 121 Maria: Dealing With Widowhood... 122 Mike: Midlife Concerns... 123 Jim and Terry: An Unmarried Couple... 124 Esther and Mark: New Love, Old Money... 125 Linda and Tomas: Comfortable... 127 Review Questions... 128 Review Answers... 129 Glossary... 131 Appendix State Information... 139 Index... 173 iv