Another common and simple way to avoid probate is to establish and fund a Revocable Living Trust.
Setting Up a Revocable Living Trust
This type of trust is established by writing a trust agreement and involves three primary players: the Trustmaker, also called the Grantor or Settlor, the Trustee, and the Beneficiary. In the typical situation, when the trust agreement is created the three players - Trustmaker, Trustee and Beneficiary - will be one in the same person.
Once the trust agreement has been signed, the Trustmaker will proceed with funding the trust with all of his or her assets and designating the trust as the beneficiary of retirement accounts, life insurance and annuities. The Trustee (who, as mentioned above, is also the Trustmaker) will then manage, invest, and spend the trust property for the benefit of the Beneficiary (who, as mentioned above, is also the Trustmaker).
How a Revocable Living Trust Avoids Probate
Because the Trustmaker will not own any property in his or her individual name after the assets have been funded into the name of the trust - they will instead be owned by the Trustee for the benefit of the Beneficiary - when the Trustmaker dies, the trust assets won't need to be probated. In other words, when the Trustmaker dies, the trust itself will continue to live on and the Administrative or Successor Trustee named in the trust agreement will have the legal authority to step into the Trustmaker's shoes. The Administrative Trustee will then be able to take over control of bank and investment accounts and business interests, collect any life insurance proceeds, retirement accounts and annuities, pay all of the Trustmaker's final bills, debts and taxes, and then distribute the balance of the trust funds to the Trustmaker's ultimate beneficiaries who are named in the trust agreement.
