Several forms of joint ownership provide a simple and easy means of avoiding probate when the first owner dies. (To learn about probate and its downsides, see the article Why Avoid Probate?)
In fact, many couples conclude that holding title to their major assets as joint owners is all the estate planning they want to engage in, at least while they are younger. To avoid probate by taking title as joint owners with someone else, you state on the paper that shows your ownership (a real estate deed, for example) how you want to hold title. Usually, no additional documents are needed.
Here are some of the ways you can use joint ownership to avoid probate.
Property owned in joint tenancy (often called "joint tenancy with right of survivorship" or "JTWROS") automatically passes, without probate, to the surviving owner(s) when one owner dies. Joint tenancy often works well when couples (married or not) acquire real estate, vehicles, bank accounts, securities, or other valuable property together. Setting up a joint tenancy is easy, and it doesn't cost a penny.
In Texas, you need a separate written agreement. To set up a joint tenancy with right of survivorship in Texas, all joint tenants must sign an agreement. For example, if you want to create a joint tenancy bank account, specifying your arrangement on the bank's signature card isn't enough. A bank or real estate office should be able to give you a fill-in-the-blanks form that will do the trick.
Property owned as joint tenants avoids probate.
Learn how to take title to property as joint tenants. However, joint tenancy is not always a good option. Joint tenancy is usually a poor estate planning choice when an older person, seeking only to avoid probate, is tempted to put solely owned property into joint tenancy with someone else. Adding another owner this way creates several potential headaches:
In some states, married couples often take title not in joint tenancy, but in "tenancy by the entirety" instead. It's very similar to joint tenancy, in that this ownership method comes with the right of survivorship, but can be used only by married couples (or in a few states, by same-sex partners who have registered with the state). Both avoid probate in exactly the same way.
If you are married (or in California, if you have registered with the state as domestic partners) and live or own property in Alaska, Arizona, California, Nevada, or Wisconsin, another way to co-own property with your spouse is available to you: community property with the right of survivorship. If you hold title to property in this way, when one spouse dies, the other automatically owns the asset. Transferring title to the survivor is simple and doesn't require court proceedings.
With the types of joint ownership described above, when one joint owner dies, generally all the new owner has to do is fill out a straightforward form and present it, with a death certificate, to the keeper of ownership records: a bank, state motor vehicle department, or county real estate records office. For more details, see How Joint Owners Can Transfer Survivorship Property After Death.
Not sure just how you hold title? You're not alone. Most people don't pay much attention to how their names are listed on title documents. Fortunately, usually all it takes is a glance at those documents—for example, the deed to your house—to see how you and the other co-owner currently hold title.
|If You're Not Sure How You Hold Title|
Kind of Property
Where to Look
|Real estate||Your deed|
|Bank account||The passbook, or the registration card on file at the bank|
|Brokerage account||A statement for the account|
|Car, boat, or other vehicle||Certificate of ownership (title) or registration slip|
|Individual stocks or bonds||Stock certificates or bonds|
To learn more about the types of joint ownership that avoid probate, as well as other simple but effective ways to avoid probate, check out 8 Ways to Avoid Probate, by Mary Randolph (Nolo).
To seek a lawyer's help with probate avoidance, find an experienced estate planning lawyer.