How to Avoid Probate in Mississippi

The Mississippi probate process can be time-consuming and expensive. Because the Mississippi probate process involves court supervision and the services of a Mississippi probate attorney, probate proceedings may last for a year or more. This delays the transfer of property to your heirs after your death. Because probate proceedings are private records, some people prefer to avoid Mississippi probate proceedings for privacy concerns.

Although it is usually impossible to avoid probate once the decedent has died, probate costs can often be avoided with proper estate planning prior to death. The devices that a Mississippi estate planning attorney can use to avoid probate include joint tenancies, beneficiary designations, and revocable (living) trusts.

Living Trusts

A living trust is a legal entity that is created during your life to hold title to your assets. Because you retain full control over the trust, including the right to revoke the trust and “undo” the transfers of assets, living trusts are commonly known as revocable trusts.

Living trusts can be set up by a qualified estate planning attorney. The creator of a living trust, called a grantor, re-titles all of his or her assets to the name of the trustee of the revocable trust, who is usually also the grantor. During the grantor’s life, the grantor retains total control over the trust assets and can change the provisions or revoke the trust at any time. As long as the grantor serves as the trustee, all income from the trust assets is taxed to the grantor as though the trust did not exist. When the grantor dies, there is no need to probate his will because he does not legally own any assets – they have all been transferred to the living trust! Instead, the successor trustee takes control of the living trust and administers it as directed by the grantor-decedent.

Living trusts are the primary tool estate planners use to avoid probate costs. Living trusts offer the following advantages over wills:

• Privacy. Wills are matters of public record. When your will is admitted to probate in Mississippi, it is filed with the courthouse and can be viewed by anyone. The same is true of all inventories of your assets and other probate matters that are filed in connection with the Mississippi probate proceeding. Because probate of a living trust is not required, its contents generally remain private. Although a short certificate of trust may need to be filed with the land records, the substantive contents of your living trust are hidden from the public eye.

• Cost Savings. The expenses that are saved by avoiding Mississippi probate through the use of a living trust can help you transfer your estate at a lower overall cost, leaving more for your beneficiaries. For example, if your estate needs to sell a parcel of land after your death, it must petition the court (and pay the attorney probate fees) in order to do so. If instead the property is held in a revocable trust, the property can be sold without the courts supervision. These savings can drastically reduce the overall transfer costs. This can be especially beneficial if your own property in a state other than Mississippi, since out-of-state property usually requires an additional probate proceeding.

• Continuity of Management. At your death (or earlier, in the event of your incapacity), the living trust specifies how your estate is to be administered. Because assets are titled in the name of the living trust prior to your death or incapacity, there is no interruption in the management of your assets when your trustee takes over. The disability planning feature allows living trusts to serve as a substitute for a conservatorship over your estate or durable power of attorney.

• Unification of Estate Plan. A living trust consolidates your estate plan in one primary instrument. This avoids the need for jointly-titled assets and beneficiary designations (although a simple pour-over will is required in conjunction with the living trust, as described below).

• Stability of Estate Plan. Because the probate laws of each state are different, a will that is validly executed in one state may be invalid in another. This is not an issue for living trusts since living trusts do not have to comply with testamentary formalities. Because living trusts are separate legal entities, there is generally no need to change your living trust if you move to another state prior to your death.

• Security of Estate Plan. Living trusts do not need to comply with testamentary requirements and formalities, such as specified numbers of witnesses and attestation clauses. This makes living trusts more difficult (and less likely to be) challenged in probate court after your death.

Despite these advantages, there are a few concerns to consider in setting up a living trust. However, these concerns can usually be addressed and are often outweighed by the benefits of a living trust. One such concern is the increased up-front cost associated with living trusts. Living trusts are more difficult for an estate planning attorney to draft and funding the trust (titling the assets in the name of the trust) requires greater effort. However, these additional costs are usually more than offset by the probate savings. For example, re-titling a parcel of land in the name of a living trust prior to your death costs the same as it would to re-title the same land in the name of your heirs after your death. The difference is that the costs are incurred prior to your death rather than after. However, to re-title the property after your death, a probate proceeding may be involved. This means that, in addition to the normal costs (such as preparing a deed or performing a title search), you must also pay probate costs associated with court approval. If probate is avoided, the living trust will result in a savings of the fees incurred in connection with court approval. The increased up-front cost also provides the benefit of allowing any title errors to be addressed before they cause significant problems and while they can be easily addressed.

Although there are many reasons for choosing a living trust, one of the most compelling is the avoidance of probate costs. However, if you are not careful, probate may still be necessary if you do not transfer all of your property into the trust. This risk can be minimized by making a thorough inventory of all of your assets and being careful to execute each document required to re-title the assets. In conjunction with your living trust, you should always have a will in place that “pours over” any assets that you neglected to transfer into the living trust.

One common misconception (and fraudulent representation) about living trusts is that they allow you to save taxes. There is nothing inherent in a will or a living trust that makes one more preferable for tax reasons than the other. Both a will and a living trust can be structured to save estate taxes.

Joint Tenancies

Most assets can be held in a joint tenancy with right of survivorship. These arrangements avoid probate because the property passes automatically to the joint tenant at the death of the first tenant to die. At the moment of death, the deceased tenant ceases to have an interest in the asset and it is immediately vested in the surviving tenant. Although the joint tenant may need to file something in the land records or provide a death certificate to third parties, the jointly-titled asset does not pass through the probate estate of the deceased tenant. The jointly-titled asset passes to the surviving beneficiary outside of the deceased tenant’s will or revocable trust. Retirement plans and IRAs are governed by beneficiary designations and cannot be held in joint tenancy.

Joint tenancies can be a dangerous estate planning device. The person named as a joint tenant becomes an immediate co-owner with immediate rights to the jointly-titled assets. For bank accounts, one joint tenant usually has the right to withdraw the entire account. If the joint tenant is untrustworthy or is a poor asset manager, the property titled in the joint tenancy is placed at risk. Joint tenancies do not provide an opportunity to plan for coordination of a person’s affairs at their death, such as paying taxes on the property and debts of the estate.

Joint tenancies can also cause adverse tax consequences. The act of naming a joint tenant is often considered a gift if the tenancy is not revocable (as is usually the case). Unless the joint tenant is a spouse, this can result in gift tax if the joint-tenant’s share of the property exceeds the annual exclusion amount. For personal residences, non-spousal joint tenancy interests can cause the loss of income tax exclusions that are available upon the sale of the home if the joint tenants do not meet the age requirements or reside in the residence.

Joint tenancies are also risky from an asset protection point of view. Titling the assets jointly opens the door to claims of co-owners, their creditors, and, in the event of a divorce, spouses of the co-owners. Because the signature of all joint tenants are generally required under state law, your ability to deal with the property could be thwarted by an uncooperative joint tenant. This can be especially risky if the property is held by multiple joint tenants.

Although these disadvantages make joint tenancies unsuitable as a primary estate planning devise, joint tenancies can play an important role in an overall estate plan. When used in combination with a more flexible probate avoidance devise, such as a revocable trust, joint tenancies can be an effective tool to achieve your goals.

Beneficiary Designations

Beneficiary designations allow you to determine who will benefit from life insurance policies, retirement plans (including pension-sharing, profit, and 401(k) plans), and IRAs at your death. These designations avoid probate because they are contractual obligations that do not pass under the terms of your will. For example, if you have named a beneficiary under your insurance policy, there is no need for the probate court to validate the transfer to the beneficiary because you have already expressed your desires in the insurance contract.

Many states allow the designation of “payable on death” (POD) beneficiaries a banking, savings and loan, and other financial accounts. You may change the POD designations at any time and name alternate beneficiaries in case you are predeceased by a beneficiary.

Beneficiary designations can be a better alternative to joint tenancies for some financial accounts because they do not subject the property to the intended beneficiary’s immediate control. However, beneficiary designations are only available for certain type of assets, such as financial accounts. For example, beneficiary designations cannot effectively dispose of real estate and many other types of assets. This limits the benefit of beneficiary designations in your overall estate plan.

It is important to note that although these devises may avoid probate costs, they do not avoid estate and inheritance taxes simply because they avoid probate. This is because your taxable estate does not always coincide with your probate estate. For example, giving a family member survivorship rights on a $500,000 parcel of land may take it out of your probate estate, but it will be included in your taxable estate if the family did not purchase his or her interest. It is important to consult with a Mississippi estate and trust attorney to determine the best strategy for accomplishing your overall estate planning goals.

NOTE: The information provided on this site is provided for illustration and informational purposes only and does not represent a proposal or specific recommendation or create an attorney-client relationship. Mississippi Probate Group, PLLC, does not engage in the practice of law. As a word of caution, the information presented cannot possibly substitute for competent legal advice. Our treatment of the law is general and is not intended as a comprehensive discussion of all relevant issues. Applicability of the law will depend upon your individual circumstances. If you have a particular question about the information presented, you can reach the site’s author by clicking the following link: Mississippi Probate Attorney. For more information, please review our terms of use.

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