Third-party contracts and deeds are two examples of contracts to disperse property upon death. Examples of third-party contracts include insurance, pay-on-death accounts, IRAs, and pension plans. Contractual deeds can either be in the form of joint tenancy, which grants rights of survivorship (i.e., the property goes to the surviving tenant); or tenancy-in-common, which grants no such rights of survivorship (i.e. the property goes to whoever is stated in the contract). Although contracts do avoid probate, they do not avoid tax consequences.

Having a contractual deed for joint-tenancy with a nonspouse may not be a good idea as it circumvents will and trust provisions. This contract creates a gift for tax purposes when a nonspouse’s name is added. However, a joint-tenancy contract postpones probate only until the second joint-tenant dies. It also may create problems for the new tenant because of taxes on capital gains income. Additional problems may occur if one joint-tenant becomes incompetent, because the asset cannot be sold or disposed of under this contract. Loss of control occurs when creating a joint-tenancy with a person who is not your spouse.