Quick answer: The main ways to avoid probate are to name beneficiaries on insurance and retirement accounts, add payable-on-death designations to bank and brokerage accounts, use a transfer-on-death deed for real estate where the state allows one, hold property jointly with survivorship, put assets in a living trust, give assets away during life, or keep the probate estate under your state's small estate limit. Each moves assets outside the court process, and each has a cost in control, taxes or risk. The right mix depends on the asset and the state.
On this page:
- How avoiding probate works
- Seven strategies, and the catch with each
- The seven at a glance
- Avoiding probate is not avoiding tax
- Is it worth it?
- Check your own situation
How avoiding probate works
Probate only handles property that is in the deceased person's name alone with nobody else attached to it. So avoiding probate means changing the way individual assets pass at death, so that a named person, a co-owner or a trust receives them directly. The Uniform Probate Code lists these arrangements as nonprobate transfers. Our guide on which assets go through probate explains what already passes outside the process. This guide is about what you can set up on purpose, and what each option costs you.
Two cautions before the list. Each tool works only for the assets it is attached to, so an asset left out stays in the probate estate. And whether you need probate at all depends on your state's rules, so it is worth checking that before paying for a plan you may not need.
Seven strategies, and the catch with each
- Name beneficiaries on life insurance and retirement accounts. The contract pays the named person directly, without a court. The catch: the beneficiary form has to be kept current, and the tax treatment differs by account. The IRS says life insurance proceeds paid because of the insured's death are generally not taxable, but all or part of a lump sum from an inherited traditional IRA may be taxable income to the beneficiary.
- Add payable-on-death (POD) or transfer-on-death (TOD) designations to bank and brokerage accounts. The FDIC describes these as accounts where the owner signs an agreement directing the bank to pay the funds to named beneficiaries at the owner's death, and the owner keeps control during life. The catch: it is done account by account, and an account you forget stays in your probate estate.
- Use a transfer-on-death deed for real estate, where your state allows it. The owner records a deed that takes effect at death. In North Dakota, for example, the deed is revocable and must be recorded before the owner's death, and it works without notice to or acceptance by the beneficiary. During the owner's life, New York's statute says such a deed does not affect the owner's right to transfer or encumber the property or create an interest for the beneficiary. The catch: not every state has one. The American Bar Association counts 32 jurisdictions that do, and the deed has to be recorded before the owner dies.
- Hold property jointly with a right of survivorship. When one owner dies, the others take that owner's interest automatically. The catch: joint owners have rights now, not just at death. As Cornell's legal encyclopedia puts it, each joint tenant has the full right to occupy and use all of the property, so you give up sole control now. The tax basis also differs: for joint owners other than spouses, the IRS calculation adds the survivor's own original basis to the value of only the part included in the decedent's estate, so it is not the same as inheriting the whole property.
- Put assets in a revocable living trust. A living trust that actually owns the assets can pass them without probate. The owner controls the trust during life, and it generally becomes irrevocable at death, as the FDIC notes. The catch: the assets have to be retitled into the trust, or the trust avoids nothing, and it takes work to set up. Probate versus a living trust compares the costs side by side.
- Give assets away during your lifetime. Property you no longer own is not in your probate estate. The catch: there are three. Gifts above the annual exclusion must be reported to the IRS on Form 709. The recipient of a gift takes the giver's tax basis, while inherited property is generally valued at its date-of-death value, which can mean a bigger tax bill when the recipient sells. And if you later need Medicaid for long-term care, gifts can be penalized: Utah's policy manual, for example, looks back 60 months from the date of application, and other states have their own rules.
- Keep the probate estate under the small estate limit. Many states let heirs collect property with a simple sworn statement instead of full probate when the probate assets are under a set value, as court self-help centers such as California's explain. The catch: the limit and the waiting period vary by state. See how the small estate affidavit works and check your number with the Small Estate Affidavit Checker.
The seven at a glance
| Strategy | Works best for | Main catch |
|---|---|---|
| Beneficiary designations | Life insurance, retirement accounts | Keep them current; inherited IRA payouts can be taxable |
| POD or TOD on accounts | Bank and brokerage accounts | Set up account by account |
| Transfer-on-death deed | Real estate, where allowed | Not in every state; must be recorded before death |
| Joint ownership with survivorship | Property shared with a spouse or co-owner | Co-owner has rights now; tax basis differs |
| Living trust | Many asset types, including real estate | Assets must be retitled into it |
| Lifetime gifts | Assets you can afford to give up | Gift reporting, carryover basis, Medicaid look-back |
| Small estate limit | Modest estates | Limits and waiting periods vary by state |
Avoiding probate is not avoiding tax
Probate is a court process. Taxes are a separate question, and skipping the first does nothing for the second. The IRS describes the gross estate for federal estate tax purposes as covering everything the person owned or had certain interests in at death, whether or not it went through probate. The IRS notes that most relatively simple estates do not need to file a federal estate tax return, but the point stands: probate planning and tax planning are two different jobs. The State Estate Tax Calculator and the Inheritance Tax Calculator cover the state side.
Is it worth it?
Avoiding probate makes sense when the cost, delay or hassle of probate in your state is larger than the cost and risk of the tools. That is a comparison, not a rule. Start with what probate would cost in your state, using the Probate Cost Calculator, and see how much probate costs for what drives it. If probate turns out to be unavoidable, how to reduce probate fees covers what you can still control. Several of these tools have legal and tax consequences that depend on your state, and court guides recommend legal help when an estate is large or complicated.
Check your own situation
Begin by listing what you own and how each asset is titled. The Estate Value Calculator shows what counts toward your probate estate in your state, which tells you how much is exposed. From there, each tool above is a way to move one asset out of that column.
Every tool is at the probate calculators page, and our methodology explains how we verify each rule.