Probate is the process of the courts sorting out a deceased person's estate. When there is a will, the terms of the will need to be followed. The executor has to be put into action, the heirs identified, taxes paid, and assets distributed. When there is not a will, the courts make the decisions for how the property of the departed gets allocated. In either case, there are probate costs for administering the settlement of the estate.

Legitimate ways to circumvent probate include everything from having named beneficiaries on your life insurance policies and your retirement accounts to how you own property. There is also the strategy of gifting to others while you are still alive, reducing your estate's potential tax liability. Following are specific strategies to circumvent probate.

Joint Tenancy with Rights of Survivorship (JTROS)

Two or more “tenants” have an equal and undivided share in an asset or account. Frequently couples own bank accounts and title to their house in this way. When the first person dies, the survivor automatically receives the decedent's stake in the asset. New paperwork then has to be completed to put the asset in the survivor's name alone. Some states may slap a lien on the house at this point to make sure taxes are paid. If the survivor in the JTROS is not a spouse, the arrangement may be scrutinized more closely. There may be one more step in which the survivor would need to get a “release” from the state to gain access to the funds of a bank account.

Tenancy by Entirety and Tenancy in Common

Tenancy by entirety is similar to JTROS except that it applies only to married couples (some states include same-sex couples if they are registered with the state). Tenancy in common differs from JTROS in that each tenant holds an independent 50 percent stake in marital property. Each individual has the right to bequeath or sell his or her interest in the property without the consent of the other. It is not the preferred method in common-law states for married couples. It could make sense for siblings who inherit property together. The one risk is that an individual is free to sell his share to an outsider.

Named Beneficiaries

Life insurance policies and retirement accounts have named and often alternate beneficiaries. It is a good idea to name alternates. If you have named your spouse as the primary beneficiary but she is no longer living at the time of your death, your children, or anyone else you have named as alternate, will be the recipient of the proceeds from these policies or accounts. The same holds true if you are single: name an alternate in case your primary beneficiary is no longer alive at the time of your death.

Payable-on-Death (POD) Bank Accounts

To create a payable-on-death bank account, simply fill out and sign a form at your bank naming the person you want to receive the money in your account at the time of your death. Even very large amounts of money are protected from probate with this designation. During your life the person has no rights to this money. You can spend it, close the account, or name different beneficiaries at your pleasure. The beneficiary simply needs to present proof of your death to the bank to collect funds in the account.

If you and your spouse sign a POD for your joint account, the designated beneficiary does not become entitled to the monies until the second spouse dies.

Retirement Accounts

You will be asked to designate a primary and alternate beneficiary when you open each retirement account. This person can claim the money directly from the custodian of the account upon your death. Note that if you have a 401(k) you would need to get authorization from your spouse to name anyone else as the primary beneficiary. Community property states (Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin) presume each spouse is entitled to half of each other's retirement accounts if that money was earned while you were married. If you are not married, you are free to name whomever you wish.

Transfer-on-Death Registration of Securities

Nearly all states have now adopted the Uniform Transfer-on-Death Securities Registration Act. Under this Act you can name someone to inherit your stocks or bonds. A beneficiary form needs to be completed. As a named beneficiary, this individual can make the claim without the need for probate by providing proof of your death and her identity to the transfer agent holding the securities. Similar to the POD bank account, the beneficiary has no claims on the securities during your lifetime.

Transfer-on-Death Registration for Vehicles

A few states in particular — California, Connecticut, Kansas, Missouri, and Ohio — offer vehicle owners the option of naming a beneficiary on the certificate of registration who will inherit the vehicle. To accomplish this you will register your vehicle in “beneficiary form.” Your beneficiary automatically assumes ownership upon your death. As with the POD bank account and transfer-on-death securities, your beneficiary has no claim on your car while you are alive. And you are free to sell the car without any consequences.

Gifts

You can remove assets from your estate by giving them away while you are alive. Gifts exceeding $12,000 each year to someone other than your spouse will necessitate the filing of a gift tax return, although you may not have to pay taxes at the moment. If you are adding a person as joint tenant to a bank account in which you have deposited funds, no gift is considered to have been made until the other person withdraws the funds. Sizable gifts to children considered minors can be transferred to a custodian under the Uniform Transfers to Minors Act (UTMA). The asset is legally owned by the minor but the “custodian” can use the assets to pay for the education and support or benefit of the child. This might include everything from braces to summer camp on the road to college.