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The Probate Process

The probate process is an important issue in estate planning and it comes up a lot. Information about the probate process is important to understanding some of the details of estate planning and helping you make decisions.

Probate is the legal process where the court or a judge validates your will and other legal documents connected to your estate. All wills are required to go through the probate process, with one exception. A joint will does not usually go through probate after the first spouse dies.

The process takes place in the Probate Court (Surrogate’s Court, Orphan’s Court or Chancery Court in some states) that has jurisdiction in the place where you live, with one exception. Assets in different states, typically real estate, must go through the probate process in that state.

The probate process may vary from state to state, including how soon the executor can file and how long they can wait before they are unable to file.

Depending on the size and complexity of your estate, the probate process can be time-consuming and expensive — up to 10% of your estate.

  • The cost of a probate process may involve attorney, executor, accountant, and court fees as well as paying for notifying beneficiaries and publishing notices in newspapers. All costs are paid for from the estate, which may require some assets to be sold.
  • The process can involve sitting through many meetings with attorneys and extended court proceedings, especially if the estate is complex and/or the will is contested.
  • The process can take months or even years to complete. The average time for a modest estate is six months to two years. All assets are frozen until the process is completed. Funeral costs, taxes and bills may have to be paid out of pocket until this happens, at which time the estate can pay them back.
  • Most states will have a simplified or “fast pass” for small estates that is less expensive and time-consuming. The probate court is still involved but has less control over the settling of the estate, and usually can be done without a lawyer.
  • Many states do not require probate if your estate is less than an amount set by that state.

Not everything in your estate needs to go through the probate process.It is important to be aware that all court proceedings will become part of the Public Record, so others will be able to see the content of your will and any trust in your name or created in your will.

The process begins after your death with your executor, an heir/beneficiary, or legal representative (administrator) appointed by a judge if you die without a will filing a petition for probate with the probate court along with a copy of your will. 

  • The filing includes lists of your property and other assets, your debts, and beneficiaries along with what they will inherit.
  • Some states allow you to file your will with the probate court before you die, but it is not required.

The court will need to validate your will or applicable trust before any further steps are taken, so it’s crucial to make sure they are correct. If your will or trust is validated, the probate court will issue an order appointing someone to represent the estate, usually your executor or personal representative.

The court will then schedule and give notice of the court hearing to all of your heirs and beneficiaries. This will be published in a local newspaper to notify others of the time of the proceeding. After this, the process usually involves supervising your executor to ensure that they carry out the wishes specified in the will, personal trust, and/or trusts created in your will. The tasks will take place in the following order.

  1. Identify and inventory your property and estimate the value of your estate based on the appraised values of your assets at the time of your death or the alternate valuation date, as specified by the Internal Revenue Code (IRC).
  2. Identify and pay any debts and pay required taxes, such as estate, inheritance, or gift tax.
  3. Distribute the remaining estate to the beneficiaries.

For more details see Tasks of the Executor.

This may or may not require an appearance in court, depending on the size and complexity of your estate.

The probate court will also attempt to resolve any challenges to the will.

If your will is not validated, the probate process will proceed as if you had no will, beginning with designating an administrator to manage your estate. A relative or friend can request to be named as the administrator.

If you are concerned about the details of your estate getting out or saving your executor and beneficiaries time and money, there may be ways to protect some or all of your assets from the probate process.

Estate Assets Subject to the Probate Process

Whether or not it is necessary for property and other assets to go through the probate process usually depends on who will be the official owner of the asset at the time of your death. The official owner of property is the person whose name is on the title. However, probate will be necessary for property without titles and for certain designated beneficiaries that cannot own property. If the title and ownership is immediately transferred to an independent adult beneficiary such as with a trust, joint ownership, or other transfer on death document, you are not considered the owner by the probate court.

Specific Assets

  • Any property or trust that is only owned by you and not able to go directly to a beneficiary.
  • The assets in any trust created in your will or any assets added to an existing trust through your will.
  • Jointly owned property by Tenancy in Common without Rights of Survivorship.
  • Personal property that does not have title documents such as furniture and appliances, clothing, household goods, and other personal items.
  • Any asset where the beneficiary is either you, the estate, a minor, or mentally incapacitated adult.

Non-probate Estate Assets

Not all of your assets are subject to the probate process and can pass directly to beneficiaries. Typically these assets will not be listed in your will, since each has its own document. It is best to store these documents with your will and other important paperwork. As with most other rules, check your specific state information to see which of these may or may not be allowed.

Other than direct gifts, there are other ways to prevent your assets from going through the probate process.

Living trusts

A trust is a fiduciary (financial) relationship where a trustee holds title to and manages your property or assets for the benefit of a third party, your heirs or other beneficiaries.

  • In a revocable living trust, you will be the trustee until you either become unable to manage the trust or you pass away.
  • At this point the trustee will be another person you have previously appointed.
  • Because the assets are passed directly to your heirs or other beneficiaries, the probate process is not involved.
  • While you are the estate’s trustee, a revocable trust does not protect assets from creditors.

 

Any assets with a designated beneficiary

When you designate that an asset will automatically transfer to someone else at your death, it is not your personal asset and will bypass the probate process. This includes things such as:

  • Life insurance settlements;
  • Annuities;
  • Proceeds from retirement plans, pensions, IRAs, and 401(k)s;
  • Payable-on-death bank accounts; and/or
  • Transfer-on-death property: Stocks, bonds, real estate, or vehicles.

All you usually need to do is request and fill out the payable on death forms available from your brokerage company or bank.

Jointly owned property with a Rights of Survivorship

Property held jointly with a rights of survivorship designates that the property will go to the surviving owner upon your death and therefore avoid probate. This may include Joint Tenancy with Rights of Survivorship, Tenant by the Entirety, and Community Property. Some only apply to spouses.

Convertible assets

Many assets can be converted to a type that does not involve probate court by simply naming another person as the designated beneficiary.

Assets to consider converting to avoid the probate process include:

  • Personal trusts;
  • Life insurance, bank accounts, and retirement plans (Payable on Death Accounts); and/or
  • Property, such as stocks, bonds, real estate, or vehicles (Transfer on Death Deeds).

Choosing Probate

You can choose whether or not your assets will be subject to the probate process.To do so you need to understand the advantages and disadvantages and how they might apply to you.

Advantages of Avoiding Probate

Since the court is not involved, your trust settlement does not become part of the Public Record, so others will not see the terms of the trust.

Your wishes cannot be contested if there is no will or probate court to oversee the distribution of your estate.

Although it can be expensive and take a large amount of time and effort to set up and maintain a trust, there are many reasons you would consider doing this — especially if you have a large and/or complicated estate.

  • You will avoid all the costs and lost personal time associated with probate court and likely save time and money in the long run.
  • Avoiding probate court may reduce estate taxes and protect some assets from creditors. There are exceptions, which may include some forms of Joint Ownership.

Even if your estate is under a certain dollar threshold, avoiding the probate process may still have financial benefits.

  • Your beneficiaries may get their inheritance more quickly, rather than waiting out the weeks, months, or even years that may be required to complete the probate process.
  • This may prevent beneficiaries from paying out-of-pocket for funeral costs, taxes and bills because your bank accounts, investments, etc. would otherwise be frozen until the probate process ends.
  • To avoid the lost income from attending meetings and court proceedings and save money on all the fees involved with the probate process.
  • To avoid the cost of a second-state probate process if there is out-of-state property, unless it is under the monetary threshold of that state.
  • When there is no will, your choice of beneficiaries can’t be contested by your other relatives in probate court.

Advantages of Going Through Probate

When the probate process is short and simple as with most small estates in most states, probate proceedings may have some benefit.

  • The court oversight protects your estate by assuring that the will is settled as you intended.
  • The process will protect your estate if you die without a will.
  • All costs are eventually paid out of the estate, so you will not need to use other financial resources that you might have needed for other reasons.
  • The simplified probate process, despite the filing fees, newspaper publication charges, and attorney fees, will likely be less expensive than setting up a trust.
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