Do You Need a Revocable Trust to Avoid Probate on Your House?

When it comes to avoiding probate on your primary residence, a revocable trust isn’t always necessary. 

In Oregon, Washington, and New Mexico you can avoid probate by retitling your home’s deed to “transfer on death.” You still retain full ownership, including the right to change your beneficiary later on. However, when you eventually pass on from this world, your property goes directly to your beneficiary and skips probate.

To do this, you get a “transfer on death” deed from the state, which is available on their website. When filling it out, you’ll need to look up the “legal address” of the property, which is different from your home’s address. That will sound something like, “the property at tax lot 1234567890, beginning at the northwest Oakhaven Ln, and terminating at northeast Willow Rd…..” Basically, search your address on the county website and enter what turns up there. 

Next, you’ll designate your beneficiaries, including the ownership percentages you want to assign. Most people with two kids will split it 50/50.

Then, get the form notarized, and submit it to your county clerk’s office. 

You’ll pay some filing fees, but in general this process is far cheaper than drawing up a revocable trust. 

All this said, there are myriad other reasons to use a trust for transferring property after your passing. Certain collections, like stamps, artwork, guns, and coins, can’t be titled in such a way as to be passed automatically to your heirs. Without a trust, these assets must go through probate. 

Investments in private funds are also difficult to title in such a way as to avoid probate. Given that these investments may be worth hundreds of thousands to millions of dollars, this is an important issue to resolve. And indeed, holding these investments in your trust is an excellent way to avoid inheritance issues. 

Another common one is less about avoiding probate, and more about avoiding catastrophe within the family. If you or your spouse have children from a previous marriage. You probably would prefer for your kids to inherit your money, or for the assets to be shared deliberately among the children. And of course, I would think you also want your spouse to be taken care of for the remainder of their lifetime. A carefully designed trust can accomplish all these goals, and avert the disasters that arise from a lack of planning. 

Another common scenario is if your kids are still relatively young or might not handle a large financial windfall particularly skillfully. The data on inheritances is similar to the research done on lottery winners. Within a couple years of receiving the money, most people are not better off. They aren’t happier. They aren’t even richer. It can be helpful for kids to receive a second and even a third chance to put that money to productive use in their lives. You can also provide guardrails for the funds, such as mandating that the inheritance be used for education, or purchasing a home. The guardrails can come off as the kids get older and demonstrate more maturity. 

But of course, why wait to teach these lessons via your estate plan? These are high-impact conversations you can start having today. You could even give your kids “small” gifts, like a few hundred to a few thousands dollars to help them get started with their retirement accounts, house downpayments, or whatever. Worst case scenario, this is just “learning money.” But if it’s done well, they learn a lot about money, and also get to use the capital to meaningfully enhance their lives.