How Do I Avoid Probate for a CD?

A common issue addressed in estate planning is how to avoid probate for a specific asset, like a CD.  To answer that, you have to understand that there are three categories of property, but just one requires probate to access it when the owner dies.

nj.com recently published an article that asked “When I die, how can I avoid probate for this account?” The article explains that there is property that passes by operation of law. This type of property is anything owned jointly with right of survivorship.  These assets will not be probated but pass to the new owner by operation of law.

Sometimes you’ll see these types of accounts labeled with “JTWROS”—joint tenancy with right of survivorship.

With joint tenancy with right of survivorship, when one co-owner dies, the property automatically passes by law to the surviving co-owner. There’s no probate involved. This is the type of ownership set up that married couples typically have for most of their accounts and property, such as the family home.

A second type of property is assets that are controlled by a contract. This includes life insurance, retirement accounts, and any non-retirement accounts that have beneficiaries designated upon death.

These designations trump the decedent’s will. Therefore, it doesn’t matter if the will says to give the life insurance proceeds to someone else. The beneficiary designated on the policy will receive the proceeds. Those proceeds also pass outside of probate directly to the named beneficiary. These types of accounts are often known as as “POD” (payable on death) or “TOD” (transfer on death) accounts.

The third type of property is the catch-all: everything else. This will include accounts that are owned solely by the person who died, with no POD or TOD designation.

In order to avoid the probate process to access a CD or any other account in only a spouse’s name, you can either make the account jointly owned by husband and wife with right of survivorship, or have your spouse designate you as a beneficiary upon death. Both options avoid the need to probate the will to access that CD account.

Talk to an experienced estate planning attorney about making sure the titles to your property reflect who owns them and how to title them to avoid probate.

Reference: nj.com (June 6, 2019) “When I die, how can I avoid probate for this account?”