Probate tends to be costly and lengthy — so much so that many people seeks ways to avoid asking their heirs to go through the process at all. There are legal, probate-free means for transferring assets to heirs in the United States, but they vary from state to state. Within the metropolitan Washington area, which encompasses Virginia and Maryland as well as the District of Columbia, some of the differences can be very significant.
The most notable means of avoiding probate is through a living trust. Upon establishing a living trust, residents of Virginia, Maryland or the District of Columbia may place virtually any asset — real estate, banks accounts, vehicles, etc. — within the trust. He or she then transfers ownership of those assets to him- or herself as the trustee of the trust and names a successor trustee, who will transfer property within the trust to the designated beneficiaries without probate per the original trustee’s terms.
Another common vehicle for avoiding probate is joint ownership, which is also permitted in all three jurisdictions. A joint ownership make take form through either a joint tenancy or tenancy by the entirety. In the former, any property owned jointly automatically passes to the surviving owner upon the death of the other. Each joint tenant must control an equal share of the property. A joint tenancy by the entirety is similar to joint tenancy, but it is available to married couples only.
A person may also use what are known as payable-on-death or transfer-on-death (TOD) designations. Payable-on-death designations for bank accounts (which allow a person to control funds that then pass on to a beneficiary free of probate) and transfer-on-death registrations for securities (in which a beneficiary automatically inherits stocks and bonds upon the death of the grantor) are permitted in all three Washington, D.C., area jurisdictions.
By contrast, the rules for transfer-on-death deeds for real estate and transfer-on-death registrations for vehicles vary among jurisdictions in the Washington, D.C., area. Virginia and the District of Columbia permit transfer-on-death deeds for real estate, which transfer real estate to a beneficiary without probate upon a person’s death, but Maryland does not allow a TOD for real estate. Virginia permits a person to employ a transfer-on-death registration for a vehicle, but neither Maryland nor the District of Columbia allow a TOD for one.
In Virginia, Maryland and the District of Columbia, a person may opt to not adopt any probate-avoidance planning but still qualify for relatively simplified “small estate” probate procedures. However, should a person wish to avoid probate entirely, an experienced estate-planning attorney will be able to help him or her make the right choices to fit the individual circumstances.