1. Estate Planning: Introduction
  2. Estate Planning: Estate Planning Basics
  3. Estate Planning: Introduction To Wills
  4. Estate Planning: Other Types Of Wills
  5. Estate Planning: Will Substitutes
  6. Estate Planning: Introduction To Trusts
  7. Estate Planning: Marital And Non-Marital Trusts
  8. Estate Planning: Charitable Trusts
  9. Estate Planning: Estate Taxation
  10. Estate Planning: Life Insurance In Estate Planning
  11. Estate Planning: Health Problems, Money Matters And Death
  12. Estate Planning: Conclusion

by Cathy Pareto, CFP®, AIF®

A will substitute is a technique that allows you to transfer property at your death to a beneficiary outside the probate process. This will not only expedite the distribution process but also avoid any costs associated with probate. What are considered will substitutes?

Right of Survivorship
Joint tenancy with right of survivorship (JTWROS)
and tenancy by entirety (TBE) transfer assets directly to the surviving tenant at the death of the other. However, tenancy by entirety can only be used by legally married husband and wife and is not recognized in all states.

Beneficiary Designation
Naming of a beneficiary can also be considered a will substitute. Examples of these include:

  • Payable-on-Death (POD) Accounts: In states where it is allowed, this involves depositing funds for the benefit of another, payable on the death of the original depositor.
  • Transfer-on-Death (TOD) Accounts: Similar to a payable-on-death account, except it is used for individual stocks or a stock account.
  • Contract Provisions Effective at Death: This can include life insurance, annuity contracts, qualified plans, 403(b) plans, 457 plans and IRAs, where you designate a beneficiary to whom payments are made after your death.
  • Deeds of Title: In some states a valid deed may be used to pass a present interest to the grantee during your lifetime to avoid testamentary formalities.
  • Funded Living Trusts: Revocable living trusts is the most common form of will substitutes. These trusts are funded during your lifetime to avoid probate at death.
Advantages and Disadvantages
The following are many advantages to having will substitutes:
  • You can avoid probate.
  • They are easier to amend.
  • They are usually revocable until death, which means that you maintain control.
  • For planning tools like TODs or PODs, they are cheap (or free) to execute.
The following are some disadvantages of will substitutes:
  • Set-up costs can be high (especially for living trusts) because they usually include attorney fees for setting up the trusts and contracts.
  • You may incur some maintenance costs.
  • You may also be on the hook for some taxes if the substitute you choose is not set up properly.

Estate Planning: Introduction To Trusts
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