Avoiding Probate in South Dakota

Probate, in its simplest terms, is a legal process that occurs after an individual's death. It involves validating the deceased's Will (if one exists), cataloging their assets, paying off any outstanding debts or taxes, and distributing the remaining assets as directed in the Will or, in its absence, as directed by state law. Navigating the probate process can be a time-consuming and costly affair, even with a Will in your arsenal.

Adding to its challenges is the fact that it is often carried out amidst loss and grief. Fortunately, strategic estate planning can be your compass, providing a means to bypass the probate process and ensuring a smoother and faster transfer of your assets to your loved ones.

This article will introduce you to the variety of ways under South Dakota law that allow you to steer clear of probate.

Joint Ownership of Property with Rights of Survivorship

A joint tenancy with rights of survivorship (JTWROS) is a form of property ownership that involves two or more individuals, called joint tenants, holding equal shares in a property.
Upon the death of a co-owner, his or her interest automatically transfers to the surviving co-owner(s), hence bypassing the probate process. This arrangement often works well for spouses acquiring significant assets like real estate, vehicles, or investment accounts. 

Life Estates

Creating a life estate is another route for avoiding probate. A life estate grants you, the life tenant, the right to use and enjoy a property for your lifetime. Upon your death, the property automatically transfers to the remainder interest holder, with no probate proceedings.

A life estate may be suitable for those who wish to provide for a certain individual during their lifetime, like a surviving spouse, but ultimately want the property to go to someone else, like their children from a previous marriage.

However, a significant drawback of a life estate is that as the life tenant, your control over the property is somewhat diminished as you must preserve the property for the future owner.

Payable-on-Death, Transfer-on-Death, and Other Beneficiary Designations

Payable-On-Death (POD), Transfer-On-Death (TOD), and other beneficiary designations provide further options. In South Dakota, you can add a POD designation to specific bank accounts, such as a savings account or a certificate of deposit (CD). Upon your death, the assets in the account directly transfer to the designated beneficiary, bypassing probate.

Likewise, a TOD designation applies to assets like stocks and bonds, where the registered assets automatically transfer to the designated TOD beneficiary upon your death, avoiding probate proceedings. Interestingly, South Dakota permits revocable TOD deeds for real property. Upon your death, the deed comes into effect, and the property transfers to the beneficiary named in the deed.

Similarly, life insurance policies, retirement accounts, annuities, and other types of financial accounts allow for beneficiary designations. These assets transfer directly to the nominated beneficiary upon your death, thus eliminating the need for probate. Beneficiary designations are an efficient, direct way to transfer assets without the delay and expense of probate court proceedings.

However, be aware that beneficiary designations only apply to the specific accounts and assets for which they are established and will not cover your entire estate. Additionally, naming different beneficiaries on each account can lead to issues in larger estates with complex asset structures.

Small Estate Affidavits

For smaller estates, South Dakota provides a simplified process via small estate affidavits. If you're a legal heir, you can claim and transfer both real and personal property without undergoing the formal probate process by filing an affidavit asserting your entitlement to a particular asset or real property.

This method is cost-effective and straightforward but is only available under specific circumstances. For instance, the small estate affidavit cannot be used to transfer real property if the deceased’s interest in the real property exceeds $50,000.

Nor can the small estate affidavit be used if the deceased incurred a debt to the Department of Social Services for medical assistance received during their lifetime. 

Establish a Living Trust

Establishing a living trust is another powerful tool to avoid probate for virtually any asset. A living trust is set up during your lifetime and outlines conditions for transferring assets to beneficiaries, subject to certain criteria. By placing your assets in a trust, you effectively avoid probate as the assets are owned by the trust, not you.

The trustee will distribute the property to the trust beneficiaries as the trust terms dictate. Various types of trusts exist, each offering unique benefits, and a trusted professional can help you choose the right one for you.

In sum, it is entirely possible to avoid probate in South Dakota. Each method has its intricacies and potential challenges that go beyond the scope of this article. Accordingly, it is highly recommended that you seek the advice of an experienced estate planning attorney.

With professional advice and thoughtful consideration of your options, you can create a well-structured estate plan that allows a seamless transfer of assets to your chosen beneficiaries.

Proactive steps and informed decisions will not only preserve your legacy but provide peace of mind for you and your loved ones.