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# Ways to Transfer Property Outside of Probate and Wills

There are four ways to transfer property at the death of the owner. Only one is through probate. The other three are the result of an arrangement or disposition made by the deceased during his lifetime but designed to cause a transfer upon his or her death. These transfer methods include: (1) contractual arrangements, such as life insurance, where the promise of the other party to the contract involves a payment or transfer to beneficiaries designated by the deceased upon his or her death; (2) joint ownership, where upon the death of one of the joint-owners the jointly held properly passes to the other; and (3) living trusts.

1. Contractual Arrangements

Contractual arrangements that can avoid probate include life insurance policies and company benefit plans, although the average person tends to overlook these items as possible probate-avoidance vehicles. When you pay insurance premiums, for instance, you're transferring funds to the life insurance company and the company agrees to pay the death proceeds to your named beneficiary. Meanwhile, assuming that you retain ownership of the policy, you can have access to it's cash value (if it's a whole life policy) during your lifetime, and upon your death the proceeds are paid directly to your beneficiary without the need for the probate process. There is, in effect, a legal contract between you and the insurance company, so no court or other outside party needs to be involved to authorize payment of the proceeds to the person named (unless you name your estate as the beneficiary).

Generally speaking, there are four reasons that you would name your estate as beneficiary of your life insurance policies: to make the proceeds available to contestants of the will and creditors of your estate; to increase the probate costs and attorney fees; to be sure that there will be a substantial delay before your beneficiaries receive any money; and to ensure that the proceeds will be subject to estate or inheritance taxes. In other words, there are no good reasons that you should name your estate as the beneficiary of your life insurance policies.

Another example of a contractual arrangement that avoids probate would be certain company benefits that are paid after the employee s death, under an agreement or contract between the employee and the employer. For instance, a contract might provide that upon the employee's death his (or her) spouse will receive $20,000 per year for five years. These amounts are paid directly to the spouse (or other named beneficiary) and do not pass through probate, since there was a contractual agreement to pay them to a specific person or persons after death of the employee.

2. Joint Ownership

Joint ownership of property is probably the most popular way of avoiding probate and transferring property at death, though this popularity may not be entirely justified. The basic operating principle behind a joint tenancy between two owners is that on the death of one, the survivor automatically owns the entirety of the jointly held property. In a way, it can be thought of as a sort of inheritance (though it is not an inheritance by law).

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