What is Probate?

Probate Court

Probate is a legal process that administers a deceased person’s assets. The process is overseen by a probate court, which has the legal authority to decide matters related to wills and estates.

During Probate, the court will determine whether the will is valid. It will also appoint an executor, locate and value assets, and pay the decedent’s debts out of the estate. The residue will then be distributed to the decedent’s beneficiaries and heirs.

The court can be involved in many aspects of closing the estate, from determining if the will is valid and ensuring laws are followed to making sure the assets are appropriately distributed and closing out the estate and any owed debts.

How does Probate work?

Each state’s laws say what is required to probate an estate. If assets need to go through probate court approval, then the executor of the deceased person’s will is typically in charge of the estate. If there is no will or the executor named in the will is unavailable, the probate court will appoint an administrator. The executor or administrator is in charge of the following duties:

  • Proving that the decedent’s will is valid
  • Gather and inventory the decedent’s assets
  • Seek appraisal for the assets
  • Pay off any debts and taxes owed by the decedent
  • Distribute any remaining property under the direction of the will or state laws

Creditors have six months to file claims against the deceased estate. As a result, you can expect Probate to take at least that long. A straightforward estate will usually complete the probate process within nine months from the appointed executor or administrator. If someone contests the will, or if the estate owes state or federal estate tax, the process can take a year or more.

Do all estates go through Probate?

Many types of property routinely pass outside of the probate process, even without the cost of establishing a living trust. All estates do not have to go through Probate, as we explain below.

Small Estates

Almost every state has some process for handling small estates. The size of the estate is determined by its overall value, and even if you live in a state that doesn’t allow you to bypass the probate process altogether, there’s generally a simplified process available, with fewer requirements and minimal court supervision. You may be able to avoid Probate if, in your state, the following is true:

  • Beneficiaries can claim property via an affidavit from the court
  • A surviving partner or dependent can take an affidavit to a financial institution to transfer ownership

Property in a Revocable Living Trust

If you have a Revocable Living Trust that holds assets, anything inside that Trust will not go through Probate. Living Trusts avoid Probate entirely. Instead, they include a Terms of Trust Agreement that allows assets to go directly to beneficiaries without any probate involved.

Property with Named Beneficiaries

Designating beneficiaries or creating Payable on Death (POD) or Transfer on Death (TOD) accounts also allows you to avoid Probate. Any account or policy with a named beneficiary would pass through automatically after your death.

Probate is necessary only for property that was:

  • owned solely in the name of the deceased person – for example, real estate or a car titled in that person’s name alone
  • A share of the property is owned as tenants in common, for example, the deceased person’s interest in a warehouse owned with his brother as an investment.

This property is commonly called the probate estate. If there are assets that require probate court proceedings, it’s the responsibility of the executor named in the will to open a case in probate court and shepherd it to its conclusion. If there’s no will or the will doesn’t name an executor, the probate court will appoint someone to serve. 

Is Probate needed if there is a will?

Many people think that a Will always has to go through Probate. But the reality is not all Wills and assets have to be probated. There are multiple instances and reasons why a Will may have to go through the complex probate process. 

How do you know if Probate is necessary?

One of the first steps after a person is deceased is to figure out if the assets owned by the decedent are probate assets. If they are non-probate assets, they won’t need to go through the process.

Non-probate assets are those held with other owners or those with a named beneficiary. Some examples of this type of asset include the following:

  • Life insurance policy with a named beneficiary
  • Checking or savings accounts in a bank with a payable-on-death or transfer-on-death designation
  • Assets owned jointly, such as a home with a surviving co-owner
  • Assets in a living trust

In those situations, someone is named automatically as the person who will receive the assets after the owner dies. The surviving owner would automatically become the sole owner with the assets owned jointly. A living trust includes a beneficiary who would receive everything included in the trust. 

Life insurance policies, retirement accounts, checking accounts, and other assets, including a beneficiary, automatically roll over to that person when the owner dies. If these accounts don’t have someone listed as a beneficiary, they may need to be probated.

Ways to Avoid Probate?

It is possible to avoid Probate entirely with careful planning. This is desirable for some people because doing so:

  • Reduces legal fees.
  • It can be slow. it can take years for a probate court to finalize an estate
  • It can be costly. Probate generally entails executor fees, attorney costs, and other administrative expenses, such as appraiser’s fees. 
  • It is public. All the material in the probate process goes into the public record.

There are various ways to avoid Probate, and careful planning may allow your estate to bypass probate court. 

  • Make accounts payable on death. Bank and other accounts payable on death go directly to your designated beneficiary without going through Probate.
  • Establish a living trust. Trusts are appealing when it comes to avoiding Probate because property held in trust is not part of your estate upon your death. 
  • Own property jointly. Making your spouse or someone else a joint owner facilitates the transfer of the asset without the need for Probate.
  • Have a small estate. Most states set an exemption level for Probate, offering at least an expedited process for what is deemed a small estate. 

Careful planning and communication with your beneficiaries and financial planner can set your estate up. Upon your death, your family may be able to avoid the timely process of probate court.

Conclusion

In most cases, Probate cannot be avoided. Therefore, making an estate plan with an attorney well-versed in estate law or financial planner can be an essential part of the process. This will ensure your estate is divided correctly and without problems, and beneficiaries receive their inheritance in a complete and timely fashion. 

Understanding the process will allow you to plan accordingly and possibly set your estate up so your family can avoid probate court at an already stressful time. If this is not possible, understanding your state’s probate court process can help the process move along swiftly and without issue for your beneficiaries.

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