Real estate owners who fail to plan leave their heirs with the expense and headache of needing to go through probate to clear title to their property. This article provides a roadmap for avoiding probate of real estate using deeds.
Two goals: control during life + avoid probate at death
Will substitute deeds
How Deeds Avoid Probate of Real Estate
Deeds avoid probate of real estate by ensuring that the property’s title is no longer in the owner’s name / or / passes automatically to someone else when an owner dies.
Real estate owners who want to avoid probate have two
Using a Gift Deed to Avoid Probate
A gift deed
Transferring property to another owner removes it from the owner’s estate. There are two ways to structure lifetime transfers. First, the owner could transfer the property outright to a new owner. The obvious downside is that the owner gives up all legal rights to the property after the transfer.
Using a Survivorship Deed to Avoid Probate
The second option, which is usually more palatable, is to add a new owner using a form of co-ownership that includes a right of survivorship. You can read more about rights of survivorship at Right of Survivorship Deeds.
Using a Life Estate Deed to Avoid Probate
A life estate deed allows an owner to continue using the property during life, then transfers it to others at death. Life estate deeds achieve the goal of avoiding probate but at a cost. Once created, the owner can no longer sell, mortgage, or otherwise deal with the property without the consent of the remainder beneficiaries. As discussed below, this loss of control can be avoided using a lady bird deed or TOD deed. You can read more about life estate deeds at Life Estate Deeds.
Using a Trust Transfer Deed to Avoid Probate
Probate can also be avoided by creating a living trust and deeding the property to the trust. When the owner dies, the property is distributed under the terms of the trust without the need for probate. Living trusts are a good solution for some people, but they almost always require an attorney to set up and fund correctly. They also require deeds after death to transfer property from the trust to heirs. You can read more about living trusts at Living Trusts.
Because of the limitations of these options, attorneys and state legislatures developed new deed forms. These forms allow property owners to avoid probate without unnecessary expense or loss of control. There are two types of deeds used to avoid probate without sacrificing control:
Using a Lady Bird Deed to Avoid Probate
A lady bird deed (also called an enhanced life estate deed) is recognized in a handful of states—including Texas, Florida, and Michigan. Like a traditional life estate deed, it avoids probate by transferring property automatically to remainder beneficiaries at death. But unlike traditional life estate deeds, lady bird deeds include language that allows the owner to sell, mortgage, or otherwise deal with the property without involving the remainder beneficiaries. You can read more about lady bird deeds at Lady Bird Deeds.
Using a TOD Deed to Avoid Probate
A TOD deed avoids probate by naming a beneficiary to inherit property at death. During life, the owner retains complete control over the property, including the right to revoke the TOD deed. You can read more about TOD deeds at Transfer-on-Death Deeds.
For property owners with simple estates, lady bird deeds and TOD deeds can achieve many of the same benefits of a living trust without the cost and complexity.
Why Avoid Probate of Real Estate
Most property owners want to avoid probate because it’s costly, time-consuming, burdensome, and public.
- Avoiding probate saves money. Probate often costs thousands of dollars in legal fees and court costs. The larger and more complex the estate, the higher the fees.
- Avoiding probate reduces hassle. Your personal representative may need to inventory assets, file court accountings, notify and negotiate with creditors, open estate bank accounts, and transfer property to heirs. These requirements can place a heavy burden on the friend or family member handling your estate.
- Avoiding probate shortens delay. Probate ties up your real estate in court. Judges rarely permit property transfers until all creditor claims are resolved and the estate is closed—a process that can take months. During this time, your heirs have limited ability to deal with your property.
- Avoiding probate protects privacy. Probate proceedings are public record. Once the estate is opened, anyone can go to the courthouse (or review records online), access your will, and see what you owned and who will receive it. Most people would rather keep that information private.
These are all valid reasons for avoiding probate of real estate, though not every reason applies in every case. And while probate avoidance involves some extra planning, most people find that the savings in time, money, and privacy far outweigh the costs.
The Probate Avoidance Principle
There are several ways to avoid probate, but they all rely on a single principle:
Probate can be avoided by arranging assets so that everything a person owns either passes automatically at death or can be transferred without court involvement.
Or, to put it in legal terms, probate is avoided when a probate asset is converted to a non-probate asset.
Every probate-avoidance technique is based on this principle. For example:
- Estate planning deeds—such as life estate deeds, lady bird deeds, and transfer-on-death (TOD) deeds—automatically transfer real estate to new owners at death.
- Joint ownership with survivorship rights—including joint tenancy with right of survivorship, community property with right of survivorship, and tenancy by the entirety—automatically transfers property to surviving owners.
- Living trusts avoid probate by transferring assets into the trust during the person’s lifetime, so the assets are not owned individually at death.
- Beneficiary designations automatically transfer financial accounts and other assets to the named beneficiaries at death.
Each of these methods converts probate assets (those that require court transfer) into nonprobate assets (those that pass automatically).