What is probate?
Probate is the legal process in which a court decides what happens to your property when you die, how your debts are to be paid, and how your assets are distributed according to your will. If you don’t have a valid will your assets are distributed according to state law. That is called “intestate succession”.
Does joint ownership avoid probate?
No, using a joint ownership usually only helps postpone the probate trial. If the property is owned as ”tenants in common” then the portion of the property owned by the deceased tenant in common will go through probate. If the property is owned in “joint tenancy” then the property automatically transfers to the surviving joint tenant when the first joint tenant dies. This will happen even if there are contrary instructions in a will. If both owners somehow die at the same time, the assets must be probated before it can go to the heirs. And keep in mind that if one joint tenant becomes mentally disabled, then neither joint tenant can make any decisions about the property without going to probate court.
Does a durable power of attorney prevent this?
A durable power of attorney lets you name someone to manage your financial affairs if you are unable to do so. However, there are many financial institutions that will not honor one unless it is on their form. If accepted, it may work too well, giving someone a “blank check” to do whatever he/she wants with your assets. This can be very effective when used with a living trust, but risky when used alone.
What is a living trust?
A living trust is a legal document that is similar to a will and contains instructions for what you want to happen to your assets when you die. Unlike a will though, a living trust can help avoid probate at death, control all of your assets and prevent the court from controlling your assets if you become incapacitated. For more information, see an experienced estate planning attorney.