Avoiding Probate: A Single Dad in Midlife

If you're a healthy 50-year-old, you probably don't need a lot of probate-avoidance planning.

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Mike is a divorced father who owns a mortgaged house in Wyoming, a growing retirement account, and some other investments. His son, Bryce, is a teenager.

Mike, who is a healthy 50, expects quite reasonably that he will live many more years. But he is by nature a cautious person and wants to make sure that if anything happened to him, his son would be taken care of. And he hates the idea of having 5% of the value of his estate go toward probate costs and fees, when it could go for Bryce's college education instead.

The house. Mike's most valuable asset, by far, is his house. It's worth about $100,000; his equity is about $50,000. He considers making a living trust to avoid probate, but is reluctant; after all, he probably won't even own this house in 25 years' time, when death will be closer. He is delighted to find that under Wyoming law, simplified probate is available for real estate if the entire estate is valued at $200,000 or less. So, if the unexpected does happen, probate shouldn't be onerous—his executor should only have to file a few papers. He crosses the house off his list.

Retirement plan funds. This one is easy, too. Mike has named his son, Bryce, as beneficiary of his 401(k) retirement plan. But because Bryce is still younger than 18, Mike has named his ex-wife to be the custodian of the money, under the Wyoming Uniform Transfers to Minors Act. He trusts her to use the money for the son they both love. Under the Wyoming law, the money—whatever is left of it—must be turned over to his son when he turns 21.

Bank accounts. Mike decides it can't hurt to make his bank accounts payable on death to Bryce, again with his former wife as custodian of the funds. To do this, he just fills out and signs the form the bank teller hands him, naming Bryce as the POD payee. He knows that Bryce won't have any claim to the money now, but will be able to claim it, without probate, when Mike dies.

He follows essentially the same procedure to put his mutual fund accounts in transfer-on-death form, with Bryce as the beneficiary. He can do so because Wyoming has adopted the Uniform Transfer-on-Death Security Registration Act.

The car. Mike owns a nice car, one that's still worth a fair amount of money though it's three years old. But even a man of his pronounced cautiousness is sure that he will be around long after the car is rusting and abandoned. He decides not to worry about planning to avoid probate of the car.

Life insurance. Mike's main estate planning concern, at this stage of his life, isn't actually probate avoidance: It's making sure that if he died prematurely, his son would be provided for through college. So he also buys some term life insurance, naming Bryce as beneficiary, to replace the income he would have used to support Bryce. Because a life insurance policy is a contract between company and customer, the company pays the proceeds directly to the beneficiary, without probate.

Leftovers. Finally, Mike makes a simple will. He leaves everything to his son except for some small gifts to charity. He also names his sister as Bryce's personal guardian, who would look after his son in the extremely unlikely event that both Mike and Bryce's mother died before Bryce reached 18. Although the items left by the will would have to go through probate, Mike realizes that this probably isn't the last will he'll make; he's using it more as a backup device than a definitive plan. If he later acquires more valuable property, setting up a probate-avoidance living trust may become justified.

Mike's Plan to Avoid Probate

Asset

Plan

House

Pass by simplified probate.

401(k) plan

Name beneficiary on form provided by plan administrator.

Bank accounts

Name payable-on-death beneficiary.

Mutual funds

Put in transfer-on-death registration.

Car

Leave by will (doesn't avoid probate).

Everything else 
(household belongings)

Leave by will (doesn't avoid probate).



by: , J.D.

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