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Take steps now to avoid probate

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ESTATE PLAN: Review your estate plan to be sure your assets are titled to avoid probate, or consult with your attorney.
Country Counsel: Avoiding probate with real estate can be done in one of three ways.

Avoiding probate is a goal that everyone should have for their estate. Avoiding probate saves time and expense for heirs and also makes the estate administration easier in an already trying time. 

It is relatively easy to avoid probate for most assets, but the steps to avoid probate must be implemented before death. The following is a description of various assets and how to avoid probate for each:

Real estate. Avoiding probate with real estate can be done in one of three ways. First, the real estate can be made “Transfer on Death” (TOD) to the beneficiary. The TOD designation is made by recording an affidavit with the county recorder. For example, the farmer records an affidavit that names a daughter the beneficiary of the farm. When the farmer dies, the farm will go to the daughter without going through probate. The daughter will simply need to record an affidavit with the death certificate.

The next way to make real estate non-probate is by transferring the land to a trust. The real estate will avoid probate because trusts allow assets to transfer to heirs without going through probate. Using the above example, a farmer transfers his farm to his trust and states the farm is to go to his daughter in the trust document. When the farmer dies, the trustee of the trust will transfer the farm to the daughter.

Lastly, jointly owned land can be transferred at death with a “Joint with Rights of Survivorship” (JWROS) designation on the deed. At death, the surviving owner receives the deceased owner’s interest without going through probate. Again, using the above example, the farmer and the daughter own the farm together. The deed designates their ownership as JWROS. When the farmer dies, the daughter will inherit the farmer’s ownership and be the sole owner of the farm.

Vehicles. Personal vehicles up to $65,000 in value may transfer from a deceased spouse to the surviving spouse without probate. However, the vehicles must be for personal use. Vehicles such as livestock trailers and grain trucks cannot be transferred in this manner. Pickups typically qualify as personal vehicles.

A TOD designation can be added to the title for any vehicle. When the vehicle owner dies, the designated beneficiary takes a death certificate to the title office to have the title transferred. This allows vehicles to be transferred outside of probate. 

For example, the farmer goes to the title office and adds his daughter as the TOD beneficiary for his grain truck. After the farmer’s death, the daughter takes a death certificate to the title office and has the truck transferred to her name, avoiding probate.

Vehicles also can be transferred to trusts, but using the TOD designation is often a simpler solution.

Life insurance. Every life insurance policy should have a beneficiary and a contingent beneficiary. Without a beneficiary, the policy will pay to the estate and go through probate. The beneficiary on the policy can be multiple people and can also be a trust. Changing the beneficiary on a life insurance policy is usually done by submitting a change of beneficiary form to the insurance company.

Financial accounts. All financial accounts, including bank accounts, IRAs, 401(k)s, investments and annuities, can avoid probate by including a “Payable on Death” (POD) beneficiary. As long as the account has a POD designation, the funds in the account will go directly to the beneficiary and avoid probate.

Livestock and machinery. Because livestock and machinery do not have titles, the ability to avoid probate for these assets is more limited. The only way to avoid probate for untitled assets is to have those assets in a trust. Adding a TOD or POD for livestock and machinery is not available since there is no title to add such a designation. 

For example, the farmer establishes a trust and transfers his machinery to the trust. The trust document names his daughter as the beneficiary of the machinery. When the farmer dies, the trustee of the trust will distribute the machinery to the daughter without going through probate.

Avoiding probate is simple for most assets. However, adding beneficiaries to the title must be done before death. Review your estate plan to be sure your assets are titled to avoid probate, or consult with your attorney. Your heirs will appreciate not having to deal with probate.

Moore is an attorney with Wright & Moore Law Co. LPA. Contact him at 740-990-0751 or [email protected].

TAGS: Management
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