Probate is the legal process through which a deceased person’s estate is administered and distributed. While it serves an important function—ensuring that debts are paid and assets are properly transferred—it can also be time-consuming, expensive, and emotionally taxing. Fortunately, several strategies can be employed to avoid help probate and ensure a smoother transition of assets to loved ones.

Revocable living trusts

A revocable living trust allows you to transfer ownership of your assets into a trust during your lifetime. You retain control as the trustee and can modify the trust as needed. While you are alive, the trust is not a separate taxpaying entity. Instead, the trust income is reported under your individual Social Security number. Upon your death, a successor trustee distributes the trust assets according to your instructions—helping avoid court involvement.

Revocable living trusts are also beneficial in the event of incapacity. Upon your disability, the successor trustee can immediately step in and manage the trust assets. This helps avoid the need to open a court-governed conservatorship to oversee your trust assets.

Assets owned by a revocable living trust help avoid probate. Therefore, changing the title of assets into the trust name is essential. Certain assets, such as IRAs and other retirement accounts, should not be transferred into the trust name because doing so will result in the IRA being treated as being distributed, which is a taxable event. Beneficiary designations are the key to transferring these types of assets outside of probate.

Beneficiary designations

A beneficiary designation is a legal provision that allows you to name a person, trust, or entity to receive a specific asset upon your death. These designations bypass the probate process, allowing for faster, private, and cost-effective asset distribution. Beneficiary designations are allowed by a wide range of financial instruments and are governed by specific legal rules that ensure your wishes are honored. Typical financial accounts that allow you to name a beneficiary include:

  • Life insurance
  • Retirement accounts, such as a 401(k) or IRA
  • Bank accounts (via payable on death, or POD)
  • Investment accounts (via transfer on death, or TOD)

Assets passing via beneficiary designation should be verified periodically to ensure they are coordinated with your overall estate plan. Once paid out to individual beneficiaries, the assets will also be subject to creditor claims. Naming a trust as the beneficiary, instead of naming individuals directly, may help avoid beneficiary creditor issues.

However, careful consideration should be given when naming a trust as a beneficiary of a retirement account, especially when the beneficiaries are non-spouses. After the SECURE Act and SECURE 2.0 Act, there are additional rules and complexities as to how trusts and retirement accounts work together for non-spouse beneficiaries. You should consult with your financial advisor or tax professional when considering this option to help ensure your trust is properly drafted to comply with these legislative changes.

Beneficiary deeds

Traditionally, individually owned real estate had to be transferred to a revocable living trust to bypass probate. Some states now allow beneficiary deeds or lady bird deeds to avoid probate for real estate. These deeds are similar in that they are generally revocable and name a beneficiary to receive the real estate at the owner’s death. However, if multiple beneficiaries are named on the deed and they do not agree on what to do with the property after the owner passes, conflict and litigation may result. Unlike other accounts that allow for beneficiary designations, changing beneficiaries on a deed often requires legal assistance.

Joint ownership with right of survivorship

Property held as joint tenants with right of survivorship or tenancy by the entirety (for married couples) automatically passes to the surviving owner without going through probate. The transfer is typically quick and requires minimal paperwork (e.g., presenting a death certificate to update the title).

Although joint ownership provides a relatively quick way to transfer property to the surviving owner, there are several potential downsides to this approach. Probate will be required upon the surviving owner’s death unless additional planning is undertaken. Once property is jointly owned, you may need the co-owner’s consent to sell, refinance, or make changes. If you add someone as a joint owner (e.g., a child), they become a legal owner. Upon your death, the property goes to them—even if your will says otherwise. Adding someone as a joint owner may be considered a gift, potentially triggering gift tax reporting requirements.

The property may also become vulnerable to the creditors of the joint owner. For example, if your child is sued or goes through a divorce, your jointly owned asset could be at risk. In states that allow for tenancy by the entireties, the creditor issue can be negated for married couples when claims are asserted against only one spouse (see our Insight, “10 Ways to Protect the Wealth You Have Built,” for more details).

For income tax purposes, a person inheriting assets generally receives a step-up in basis if they inherit property through a will or trust. That means if the property was bought for $100 but is worth $1,000 at the owner’s death, the beneficiary can sell it for $1,000 and not owe any tax. Conversely, if the beneficiary receives ownership via joint ownership, they may not receive a step-up in basis on the full property value, potentially increasing capital gains tax when they sell.

Gift assets during lifetime

Assets gifted during life are no longer part of the decedent’s estate, meaning they bypass probate entirely. Gifting also reduces the size of your taxable estate, potentially lowering federal estate tax liability. This is especially relevant for estates approaching or exceeding the federal exemption limit ($13.99 million in 2025). You can gift up to $19,000 per recipient per year ($38,000 for married couples) without triggering gift tax or using your lifetime exemption.

As is generally the case, there are a few potential negative consequences to consider. Assets gifted during life retain the original cost basis, which can result in higher capital gains taxes for the recipient if they sell the asset. In contrast, assets passed at death receive a stepped-up basis, potentially eliminating capital gains tax. Gifts made within five years of applying for Medicaid can trigger a penalty period, affecting eligibility for long-term care coverage. Gifts exceeding the annual exclusion count against your lifetime gift tax exemption. If you exceed this, you may owe federal gift tax.

Small estate affidavit

In some states, if the estate is below a certain value, heirs can use a small estate affidavit. This simplified process avoids formal probate but may still require some paperwork. The asset ceiling for using a small estate affidavit in most states is usually somewhere less than $100,000 in assets. Also, a small estate affidavit cannot be used for real estate. The low asset threshold and the inability to transfer real estate make the small estate affidavit of limited use for most estates.

While avoiding probate is a common objective in estate planning, it’s important to weigh both the benefits and potential drawbacks of any strategy. Every individual’s circumstances are unique, and there is no one-size-fits-all solution. Consulting a qualified professional is essential to determine the most appropriate approach for your specific needs. If you have any questions or wish to discuss your planning options, reach out to your Cerity Partners advisor or request an introduction today.

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