Avoiding Probate for Securities - (2024)

FAQs

How to avoid probate with stocks? ›

Transfer on death (TOD)

A transfer-on-death account is an arrangement that allows the assets held within a brokerage account to pass directly to a named beneficiary upon the account holder's death, thus avoiding probate. Banks offer a similar designation, known as payable on death (POD).

You can change beneficiaries or cancel your TOD throughout the life of your account, usually by filling out the documents a firm requires to make changes or revoke the TOD. Once you die, your designated beneficiaries cannot be changed. A TOD generally allows you to avoid probate with respect to your account holdings.

Property that is jointly owned with a survivorship right will avoid probate. If one owner dies, title passes automatically to the remaining owner.

Establish a living trust: This is a common way for people with high-value estates to avoid probate. With a living trust, the person writing the trust decides which assets to put into the trust and who will act as trustee. When the trust owner dies, the trustee will divide the assets outside of probate.

Protect your assets - update your estate plan today

Luckily, there are solutions. First and foremost, there are a number of asset types that typically do not pass through probate. This includes life insurance policies, bank accounts, and investment or retirement accounts that require you to name a beneficiary.

The decision to liquidate stocks should be made in accordance with the terms of the will and with the best interests of the beneficiaries in mind. If the will specifies that the stocks should be sold, then the executor is obligated to follow the terms of the will and liquidate the stocks.

If the will specifies that the stocks are to go to one or more specific beneficiaries, the stocks can usually be transferred to those individuals unless the assets must otherwise be used to satisfy the liabilities of the estate.

Due to this, your brokerage account should almost always go inside your trust so it can grow as intended and never trigger a probate issue as it grows inside the Trust. This brings us to the other two accounts mentioned above – your retirement accounts, those being a 401(k) and an IRA.

If you designate a transfer-on-death (TOD) beneficiary, the process can actually be pretty straightforward. Your shares will pass directly to the person you've named and won't have to go through the probate process.

By using a living trust, you can avoid the necessity of the probate process for any assets that are held by the trust, and the distribution of those assets can take place immediately following your death. The living trust works to avoid probate because the trust itself owns any assets you transfer into it.

Which assets from the estate of which individual avoid probate at that individual's passing? ›

Pension plans, life insurance proceeds, 401k plans, medical savings accounts, and individual retirement accounts (IRA) that have designated beneficiaries will not need to be probated. Likewise, assets jointly owned with a right of survivorship can bypass the probate process.

The Cons of Probate in California

Delays in Asset Distribution: Probate can be time-consuming, causing delays in asset distribution, which may not be ideal for heirs in need of quick access to funds. Complex Court Procedures: The probate process can be intricate, potentially taking months or even years to complete.

Totten trust, also known as a payable-on-death account, avoids probate because it allows a beneficiary to claim the assets directly. JTWROS, which stands for Joint Tenants with Rights of Survivorship, also bypasses probate by granting the surviving owner full ownership upon the death of the other.

Why do some dislike the probate process? Because probate is public and difficult to maintain privacy for the deceased person and his or her heirs. The court caps the amount a personal representative can earn to $25 per day. The probate process makes it difficult to execute a will efficiently.

All worldwide assets, such as cash and investment accounts, ISAs and shares, are valued as at the date of death, but are not distributed until probate is granted. Taxes are also normally paid based on the date of death values.

These assets are required to pass through probate court and are distributed according to your Will, and if there is no Will, to your next of kin, according to state law. Examples may include real estate, stock, or a bank account titled in your name alone.