Probate and You

If there is one recurring question that most everyone has, it is “why do we have to do probate?” The answer for those who spend a few minutes to understand it, and plan accordingly, is fairly simple. You don’t have to do probate if you don’t have probate assets. Non-probate assets are any assets that automatically pass to your beneficiaries without the need for a court order. It’s fairly simple, but you must be careful in how you own and title your assets.

First, assets that are owned jointly with right of survivorship continue to be owned by the joint owner when the first of the joint owners dies. If you own bank accounts, or a house, and your spouse, or children or anyone else is a co-owner with right of survivorship, then that co-owner automatically owns the property if you die. If life insurance names a beneficiary, the beneficiary owns the proceeds when the insured dies. The important thing to remember is that the bank account or other paper creating the account must state that it is owned in survivorship. That is easy enough on a bank account, but for real estate, the deed must state the ownership is with right of survivorship. If not, probate will need to be done to pass on the deceased’s share under a will or under the laws of the state where the property is located.

For motor vehicles, Connecticut some time ago changed the regulations so that you can name the person you want to inherit the car by filling out a form on the back of your registration. It’s very simple, but unless you take the time to fill it out, the form is meaningless and your heirs will have to do probate to pass on the car after your death.

Second, the law of unintended consequences will take hold if you do have a joint bank account with someone for convenience, but want that bank account to go to someone else if you die. The joint account means the joint owner is the sole owner if you die, and not the person you may have named in your will. This can happen if someone wants a child to help them with handling the checking account, but wants all the children to inherit. A way to avoid this problem is to have the child you want handling the account while you are alive, named as Power of Attorney, but have all of the children named as beneficiaries upon your death.

Avoiding the probate process boils down to owning assets either as joint survivor owners with others, or having those others named as beneficiaries, as is done on life insurance policies. This is not complicated, but as the years go by, it is easy to forget to do that on a new checking account or a new car, so being aware of how you own new assets is important.

Another thing to remember is that if you own assets, such as real estate, that clear title will not pass on to your heirs unless an inheritance tax return is filed to show that no tax is due. For most people, no tax is due when they die because the current Connecticut exemption limit is $13.61 million. But the catch is that title will not clear into the joint owners name until a tax clearance letter is obtained from the probate court. That is called a certificate of no tax, and is only issued by the probate court. So even though the real estate does not “go through probate”, a probate fee must be paid to obtain the certificate of no tax. Without that, no buyer will buy the real estate because it will not have clear title until that certificate of no tax is filed on the land records.

Many people think that means the property has gone through probate, but it does not go through probate. It just shows the buyer than no tax is due upon transfer.

In short, probate can be avoided in most cases, simply by being careful and titling assets in a way that passes them onto your heirs directly. A probate fee is required to be paid in any estate, but the time and effort of “doing probate” can be avoided.

Attorney Stephen O. Allaire is Of Counsel and Attorney Halley C. Allaire is principal in the law firm of Allaire Elder Law, members of the National Academy of Elder Law Attorneys, Inc., with offices at 271 Farmington Avenue, Bristol, (860) 259-1500, or on the web at www.allaireelderlaw.com. If you have a question, send a written note to either attorney at Allaire Elder Law, LLC, 271 Farmington Avenue, Bristol, CT 06010, and they may use your question in a future column.