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An Efficient Estate: Avoiding Probate

by | Feb 19, 2021 | Estate Planning/Will Preparation |

Every person who passes away dies with an “estate,” consisting of their worldly goods and possessions. However, not every person needs to have a probate.  Probate comes from the Latin probare, meaning “to test” or “to prove.”[1] In most cases, probate involves “proving” what is a person’s valid and controlling Last Will and Testament.  However, probate can be avoided through the use of several non-probate transfers.  The most common transfers are Pay on Death Beneficiaries, Joint Tenancy, and Transfer on Death Deeds.  By using these alternatives, the sometimes long, costly, and public process of probate can be avoided altogether.

Pay on Death Beneficiaries

Certain items in your estate do not always follow the directions provided in your Last Will and Testament (or via the state’s intestacy laws, if you do not have a Last Will and Testament).  The most common are Pay on Death Beneficiaries, as commonly found on your checking and savings accounts, retirement accounts, and life insurance policies.  By naming beneficiaries, you are able to avoid the probate process by instructing the financial institutions holding these accounts during your lifetime. The easiest way to complete this is to contact the financial institution and ask to review your beneficiaries. Each financial institution will have their own separate forms that must be completed. These items must be completed before your death: timely action and planning is required.  Generally, most institutions allow you to name primary beneficiaries as well as secondary beneficiaries in the event the primary beneficiaries predecease you. After your death, your beneficiaries generally only must submit a death certificate and complete the transfer paperwork provided by the financial institution. As noted, any Pay on Death Beneficiaries you name may supersede what is listed in your Last Will and Testament or other estate planning documents.  It is recommended to speak to an estate planning attorney to ensure your beneficiaries are correctly named and your wishes are fulfilled upon your passing.

Joint Tenancy

Joint Tenancy is one of the most common forms of ownership of real estate, and it is also  sometimes used for stocks, bank accounts, and other ownership interests.  Joint Tenancy’s main benefit is derived from the “right of survivorship.”[2]  When a joint tenant dies, the remaining joint tenant(s) become the owners of the deceased joint tenant’s share.  This process is completed automatically, but for real estate, it is generally evidenced in the recorded deed history of the property by an affidavit and death certificate.  Whether you own your property as joint tenants depends on how the property was deeded or transferred to you initially.[3] Spouses generally purchase and own their home and other real estate in joint tenancy.  However, it is recommended that an experienced attorney review your ownership interests, and determine  if any transfer deeds or other documents are required to change your ownership into joint tenancy. 

Transfer on Death Deeds

An alternative to joint tenancy is the Transfer on Death Deed, commonly called a “TODD”.  Unlike Joint Tenancy, the TODD is not a present day ownership interest and it only applies to real estate in most states, including North Dakota and Minnesota.  As a Pay on Death Beneficiary works for your financial accounts, a TODD works to name a beneficiary on your real estate. Chapter 30.1-32.1 of the North Dakota Century Code, and Section 507.071 of the Minnesota Statutes note the states’ respective requirements to complete a TODD. Generally, the TODD must be executed by the transferor, and the TODD must name to whom the real estate should be transferred upon the transferor’s death.  The TODD must be recorded during the transferor’s lifetime to be valid, but the actual transfer of the real estate will not be effective until the death of the transferor.  As with Joint Tenancy, the death of the transferor is usually evidenced by the recording of an affidavit and death certificate to complete the transfer.  By using a TODD, you are able to name a beneficiary for your real estate. And much like Pay on Death Beneficiaries for your accounts, you can freely change the TODD as your estate plan or wishes change. There are other legal requirements concerning TODDs, and it is recommended to consult an estate planning professional to ensure the TODD is valid and effective.

Through the use of Pay on Death Beneficiaries, Joint Tenancy, and Transfer on Death Deeds, you may be able to save the cost of probate and enable your heirs to receive your property sooner than through the probate process. There are times where these methods may also be used to save on part of the probate process, such as where the majority of your assets are in North Dakota, but you own a lake cabin in Minnesota. By executing and recording a TODD, you may be able to skip the separate Minnesota probate proceeding that otherwise would be required.  Ohnstad Twichell has experienced and dedicated estate planning attorneys who can assist you with your estate plan.  We strive to provide you with the best and most efficient estate planning that is available.  Please contact us to schedule an appointment and start planning your efficient estate, and possibly avoiding probate, today.

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*Disclaimer: This article’s content is for general information purposes only. Readers should not rely on this article as legal or tax advice. Laws, regulations, and information change frequently, and the article’s content may not be current. This law firm makes no warranties, guaranties, or representations about the content of his article. By using this website and reading this article, you understand that there is no attorney-client relationship between you and the author or Ohnstad Twichell, P.C.  Readers should consult with a licensed attorney in their state concerning their own situation with regard to the reader’s specific legal or tax questions.

[1] https://www.lexico.com/en/definition/probate

[2] Right of Survivorship Definition, Black’s Law Dictionary (11th ed. 2019), available at Westlaw  (“A joint tenant’s right to succeed to the whole estate upon the death of the other joint tenant.”)

[3] N.D. CENT. CODE § 47-02-06 (2019)

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