The purpose of probate is to ensure that an estate is properly distributed among its beneficiaries, heirs and creditors. Unfortunately, the probate process can be time consuming and costly, with fees (court, lawyer, etc.) reducing the size of the estate left for distribution. With proper planning, many, if not all, of an estate's assets can avoid the probate process.

Some of the more popular estate planning techniques that help avoid probate are:

Joint Tenancy (Ownership) with Rights of Survivorship
Simply stated, joint tenancy is joint ownership of property where each owner has the right to the property (in part or in whole, depending on the number of owners) should one of the joint owners die. Joint tenancy is frequently used by couples (married or not) when acquiring valuable property, such as real estate, securities, vehicles, and bank accounts.

The advantage of joint tenancy is that the property passes, without probate, to the surviving owner(s) with very little paper-work.

The disadvantage of joint tenancy is that each owner has control of the property, making it possible for them to sell, mortgage, or lose their share to creditors. Caution should be used when entering into joint tenancy.

Payable on Death (POD) Bank Accounts
Adding a POD designation to a bank account is as simple as filling out a form (provided by the bank) naming a beneficiary to inherit the money in the account upon the account holder's death. The account holder surrenders no rights to the beneficiary and can spend the money, close the account or even change beneficiaries at will.

Upon death of the account holder, the beneficiary simply presents the bank with proof of their identity and a certificate of death for the account holder and collects the funds without ever involving the probate court.

Transfer on Death (TOD) Securities
TOD securities operate similar to a POD bank account and can be used with stocks, bonds, and brokerage accounts. The owner of the securities simply fills out a 'beneficiary form' with the broker, or company itself, and names a beneficiary. As with POD bank accounts, no rights are given over to the beneficiary and the owner of the securities can change the beneficiary at any time.

When the securities owner dies, the beneficiary simply presents the same documentation as with a POD bank account to the broker (or transfer agent) and claims the securities without probate.

Beneficiary Designations
Several different accounts, such as 401(k)s, IRAs and insurance policies, allow for the designation of a beneficiary. These designations are considered contractual obligations to pay out upon death and are not subject to probate.

Revocable Living Trusts
A revocable living trust holds title to property for the benefit of an individual. Since the property is held in trust, it is not considered part of the individual's estate and is not subject to probate (trust assets are still considered part of an estate for tax purposes, however). As with a will, the trust document specifies which heir(s) will inherit what property.

Living trusts tend to not be practical for smaller estates, unless privacy (probate court records are public) is a major concern. Living trusts are often expensive to create and must be properly maintained throughout the life of the trust to make them effective. The same probate avoidance can usually be achieved by other methods.

Gifts
Only assets owned at time of death are part of a person's estate, therefore, giving away assets as gifts before death allows those assets to avoid probate. Another advantage to the giving of gifts is that, by reducing the size of their estate, a person could make their estate eligible for a more streamlined probate process (the qualifications vary from state to state) that allows it to avoid actual court proceedings. Probate for these 'small estates' can often be handled, without hiring a lawyer, through the court clerk or even, sometimes, by mail.

One point to consider in relation to gifting is that, in order to avoid having to file a federal gift tax return, gifts should be limited to less than $12,000 of value per recipient per calendar year (that amount can change year to year).