When it comes to estate planning, probate is one of those things that almost everyone tells you to avoid. This is with good reason: while probate is an occasionally necessary part of the estate planning process, it is almost never to the benefit of your beneficiaries. It complicates what should be the relatively simple process of transferring your assets over to your loved ones, not to mention costing them a lot of money and time.
As such, it is important to understand what probate is and how it can be best avoided.
What Is Probate?
Probate is the legal procedure that your estate goes through after someone dies. During this legal proceeding, the court appoints either an executor named in the will or administrator (if there is no will) to administer the distribution of the estate to the proper heirs. The probate process includes:1
- proving in court that a deceased person’s will is valid
- identifying and inventorying the deceased person’s property
- having the property appraised
- paying debts and taxes, and
- distributing the remaining property as the will/state law directs
In the simplest terms, probate is a court-supervised process in which the authenticity of the will left behind is proven to be valid and accepted as the true last testament of the deceased. From there, the goal is to ensure that the beneficiaries listed receive the proper titles and assets from their estate.2 However, if the deceased does not have a will in place, the probate court will have to determine how to distribute their assets based on state laws.
The probate court always has to determine the validity of the will, but how much they have to get involved with an estate beyond that largely depends on how far the deceased planned ahead. If they have a well-written will and other estate planning documents in place before their passing, relatively little has to go through the court, as there are clear guidelines for how the estate should be handled. Without a will though, virtually everything has to go through the courts, which can be time-consuming and costly.
Probate With a Will vs. Probate Without a Will
When the deceased has a will, their executor (usually a financial advisor) is responsible for filing the will with the probate court, which initiates the probate process. The probate process is a court-supervised proceeding in which the authenticity of the will left behind is proven to be valid and accepted as the true last testament of the deceased. The court officially appoints the executor named in the will, which gives them the legal power to act on behalf of the deceased.3
Once they have been given the right to move forward by the court, the executor is responsible for locating and overseeing all the assets of the deceased, along with paying off any taxes and debt owed by the deceased from the estate. The executor is also responsible for filing the final, personal income tax returns on behalf of the deceased. After the inventory of the estate has been taken, the value of assets calculated, and debts paid off, the executor will then seek authorization from the court to distribute whatever is left of the estate to the beneficiaries.4
If a person dies without a will (or if their will has been deemed invalid by the court), they are said to have died intestate. The probate process for an intestate estate requires the court to determine how to distribute the decedent’s assets according to state laws. This is carried out by a court-appointed administrator, who essentially serves the same role as the executor. The administrator gets in contact with any legal heirs of the deceased, working out what assets need to be distributed among them.
How Do You Avoid Probate?
Without the presence of a will, the probate process can take a long time, sometimes even years. It can also eat into the money that you planned to go to your loved ones and other beneficiaries. The only time that probate makes sense is if your estate will have complicated problems, such as many debts that can’t easily be paid from the property you leave. As such, it is a good idea to take steps that can limit the headaches that probate often causes.
A few options that can help you avoid probate include: 5
- Have a Small Estate: Most states have an exception level for probate, offering an expedited process for smaller estates.
- Give Away Assets While You’re Alive: The fewer assets included in your estate plan, the less complicated the probate process will be.
- Establish a Living Trust: Property held in trust is not part of your estate upon your death, as your trustee is the one who controls it.
- Own Property Jointly: Making your spouse (or someone else) a joint owner speeds up the transfer of assets without the need for probate.
- Make Accounts Payable on Death: Bank and other accounts that are payable on death go directly to your designated beneficiary without going through probate.
All the end of the day, we all want to know that our estate will be managed fairly and equitably when we’re gone, that our assets will go to the right people in a timely manner. By taking a few steps to avoid a drawn-out probate period, you can rest assured that your loved ones won’t be left waiting for the court to decide who gets what.
If you have questions about your unique situation or are ready to talk to someone to start making your plan, schedule a free appointment!
1. Nolo. (2021, April 1). What is probate? www.nolo.com. https://www.nolo.com/legal-encyclopedia/probate-faq.html.
2. Hicks, P. (2021, May 25). Probate – What is probate & how to avoid IT. Trust & Will. https://trustandwill.com/learn/what-is-probate.
3. Kagan, J. (2021, April 8). Probate. Investopedia. Retrieved November 12, 2021, from https://www.investopedia.com/terms/p/probate.asp.
4. Kagan, J.
5. Bell, K. (2021, November 4). What is probate and how can you avoid it? NerdWallet. Retrieved November 12, 2021, from https://www.nerdwallet.com/article/investing/what-is-how-avoid-probate.