Want to avoid having your real estate go through probate when you pass away? Your heirs and beneficiaries – not to mention the legacy of your property – could greatly benefit from skipping the lengthy and often costly process of probate. Read on for several legal ways to avoid probate in Virginia.
What is probate?
Before diving into ways to avoid probate, it’s essential to understand what probate is and why people seek to avoid it. Probate is the legal process of distributing someone’s assets to their heirs after they pass away. During probate, the deceased’s will is authenticated (if they have one) and any debts on the estate are settled before the assets are passed on.
We’ve written a full guide to probate and real estate in Virginia here. The probate process can be time-consuming and costly, and can tie up your property for months or even years. Fortunately, there are several strategies you can use to avoid probate in Virginia, particularly concerning real estate.
Why avoid probate with real estate?
Probate is a very normal process when someone dies with or without a will, but there are many reasons to avoid probate in Virginia or elsewhere.
Save Money Probate involves court fees, attorney fees, probate taxes, and other costs that can eat away at the value of your estate.
Save Time Probate takes months – and can even take several years – which can limit your heirs access to the property until the process is complete.
Stay Private Probate is a public process, allowing anyone to access the details of your estate. If you want to keep the value of your assets and the names of your beneficiaries private, avoiding probate can help.
Want to set your beneficiaries up well to take on your real estate? Send them our free guide to inherited real estate.
How can I avoid probate with real estate in Virginia?
If you plan ahead, there are several legal methods that can be employed to skip the probate process in Virginia:
Each of these strategies to avoid probate have their own unique advantages and disadvantages. Let’s break each one down.
Joint Tenancy with Right of Survivorship
Joint ownership with the right of survivorship (JTWROS) is a straightforward method of holding title to real estate in a way that avoids probate. This approach is often used by spouses or close family members who wish to ensure that property passes directly to the surviving owner or owners when you die.
How JTWROS Works:
When your property is held in joint ownership with the right of survivorship, there are multiple owners who each hold an equal share in the property. When one owner dies, their share transfers automatically to the surviving owner or owners without needing to go through probate.
This is an immediate process and it bypasses the legal complexities that usually come with transferring property through a will.
In Virginia, joint ownership by married couples is called a tenancy by the entirety. This type of JTWROS offers additional protections to the spouse against creditors (unless their debts are jointly owed) and ensures that your property will pass directly to your spouse if you pass away.
Advantages of JTWROS:
The property avoids the probate process entirely
Ownership and control of the property is immediately transferred to the surviving spouse or joint owner upon death
There’s no legal delay in accessing or managing the property
Setting up joint ownership is fairly simple and can be done upon purchase or through a deed change
Disadvantages of JTWROS:
Decisions about a property under joint ownership must be agreed upon by all owners
You can’t change your estate plan for the property – the property will automatically transfer to the surviving owner
Multiple joint owners could generate conflict for how the property is managed or sold
The surviving owner will inherit the financial responsibility of the property, which could put them at risk with creditors
Transfer-on-Death Deed
Setting up a Transfer-on-Death Deed (TOD) in Virginia allows you to name a beneficiary who will automatically inherit your property when you die. The real estate will avoid going through probate. It doesn’t affect your ownership during your lifetime, and you can revoke or change the beneficiary at any time.
How a TOD Deed Works:
When you own property in Virginia, you can set up a Transfer-on-Death Deed with the county recorder’s office. It’s a legal document where you specify a beneficiary who will inherit your property immediately upon your death. You’ll retain all your interest in the property until you die, so the TOD doesn’t limit your control or ownership during your lifetime.
You can change or revoke your TOD deed at any point during your lifetime as long as you are of sound mind. If you decide to change the beneficiary, all it takes is filing a new TOD to update your wishes.
Advantages of a TOD Deed:
The property avoids the probate process entirely
You keep full control over your real estate during your lifetime, including the ability to sell or mortgage it as you wish
You can change or revoke a TOD deed at any time without needing the beneficiary’s consent
It’s usually less expensive than other estate planning tools, like creating a trust
Disadvantages of a TOD Deed:
The beneficiary doesn’t have any rights to the property or its benefits until your death
If you have multiple heirs or if heirs are unaware of the TOD deed, it could lead to disputes about the fairness of asset distribution
A TOD deed doesn’t protect against creditors, so the property can still be subject to claims during your lifetime
Likewise, beneficiaries with financial issues could find their interest in the property subject to creditor claims after your death
This method is only applicable to real estate, not other assets in the estate
Revocable Living Trust
A Revocable Living Trust is a powerful estate planning tool that can help you avoid probate with your real estate and other assets. It provides greater control over how and when your assets are distributed to your heirs. It’s great if you want a comprehensive and flexible approach to managing your estate.
How a Revocable Living Trust Works:
Creating a trust allows you to transfer ownership of your real estate to the trust, but you maintain control as the trustee. Upon your death, the property is distributed according to the terms of the trust without going through probate.
The trust document specifies how the assets should be managed and distributed after your death. Your designated successor trustee would at that point take over and distribute the assets according to your wishes, skipping the probate process.
As the grantor and trustee, you have complete control over the assets in the trust, so you can sell or mortgage the property just as you would if it were still in your name (rather than the trust). It’s revocable, so you can change or revoke it at any point during your lifetime.
Advantages of a Revocable Living Trust:
All assets placed in the trust bypass the probate process
You maintain full control over your real estate and other assets during your lifetime
You can change the trust’s terms or beneficiaries at any time during your lifetime, or revoke the trust entirely
Details of your trust remain private and confidential, unlike a will, which becomes public record during probate
It’s a comprehensive estate planning option, as all types of assets can be placed in a trust
Disadvantages of a Revocable Living Trust:
Legal fees for setting up a trust can be expensive
Careful planning is needed to make sure all your assets are properly transferred to the trust, as it’s more complex than a JTWROS or TOD deed
There aren’t immediate tax benefits or asset protection from creditors during your lifetime
Trusts require maintenance, so you’ll need to keep records, update the trust as needed, and ensure that assets are correctly titled in the name of the trust
Life Estate Deed
A life estate deed is a way to avoid having your real estate go through probate when you pass away without a trust. When you use a life estate deed, you retain the right to use and live in the property while you’re alive. Your heir – or remainderman – will inherit your property upon your death, skipping probate.
How a Life Estate Deed Works:
A life estate deed creates a legal division of ownership between you (the life tenant) and the remainderman. The ownership of your property becomes two-fold: the life estate and the remainder interest.
The life estate is your interest in the property. You retain the right to live on the property and benefit from it during your lifetime. You will also continue to be responsible for paying property taxes, maintaining the property, and you can collect any income generated from it.
The remainder interest is that which the remainderman holds, indicating they have a future interest in the property. They won’t have rights to the property until your death. When you pass, they automatically gain full ownership of the property and avoid the probate process for it.
Advantages of a Life Estate Deed:
The property is transferred automatically upon your death, avoiding probate
You keep control over the property during your lifetime, including the right to live in it and benefit from it
In Virginia, you may continue to benefit from any property tax exemptions or credits you were eligible for, such as the elderly or disabled exemptions
A life estate deed can protect the property from being used to pay for long-term care costs, though Medicaid benefits can depend on circumstances and timing
Disadvantages of a Life Estate Deed:
Life estate deeds are generally irrevocable, so you cannot change the designated remainderman without their consent
The remainderman has a vested interest, so you need their approval to sell or refinance the property
If you transfer the remainder interest within five years of applying for Medicaid, it may be subject to Medicaid's look-back rules, which could affect your eligibility for benefits.
Gifting the Property
If retaining ownership of the property while you are alive isn’t important to you, you could gift the property to your heirs during your lifetime. Gifting the property allows your heirs to avoid probate without setting up a trust, but it can have tax and Medicaid implications.
How a Gifting a Property Works:
Gifting a property entails transferring its title to your heir through a deed. Your heir becomes the new owner once the deed is recorded, and they will have full control over the property. At that point, you won’t have any legal rights to the property (unless you made specific arrangements, such as reserving a life estate).
If you won’t need the property and/or want to simplify your estate, gifting the property could be the way to go. You’ll want to make sure you and the person you are giving it to fully understand the tax implications of your particular case. Always consult a tax advisor or estate attorney before proceeding with gifting a property to make sure it aligns with your overall estate planning goals.
Advantages of Gifting a Property:
The property is no longer part of your estate, so it won’t go through probate when you die
It’s a very straightforward process
It can reduce your taxable estate (especially helpful if your assets may exceed the federal estate tax exemption)
Disadvantages of Gifting a Property:
Once gifted, you lose your control over the property and the new owner can sell or dispose of it without your consent
There may be tax implications if the value of the property is greater than the annual gift tax exclusion limit (but this can be offset by your lifetime gift and estate tax exemption)
Medicaid eligibility can be impacted if long-term care is needed within five years of the gift
The new owner may owe capital gains taxes on the gift
The Bottom Line
Avoiding having your real estate go through probate could be a great gift to your beneficiaries, as it can help save time, money, and stress as well as keep their inheritance private.
There are various strategies available to help you legally avoid probate in Virginia, each with its own pros and cons. Consider your personal estate planning goals when choosing a method, and always be sure to consult with a tax advisor or estate attorney when planning to skip the probate process.
By planning ahead to avoid the probate process, you can ensure your property is passed on to your loved ones the way you want and with minimal hassle.