What is Probate and do I want to avoid it?

We often encounter clients that are afraid of probate. This can be for good reason: sometimes a probate process is filled with stress and infighting, or court troubles over access to an asset. But it isn’t always like that. And if there is a chance that it could get that way for you, it is easy to avoid.

What is the Probate Process?

The word “probate” refers the court system that handles the administration of the estates of deceased persons to ensure the deceased individual’s assets are transferred to the rightful heirs. (When we say “estate,” we mean any and all assets belonging to the deceased after death, whether it is just 1 bank account and some clothes, or a complicated estate worth millions.) Probate Court handles other matters such as guardianships and juvenile issues, but most commonly it is know for the administration of the estates of deceased individuals. Most counties have their own probate courts, but smaller counties may share probate courts.

The probate process will be guided either by your Last Will and Testament, or if you don’t have a Will, by the State’s rules for who inherits what. In other words, unlike what some people believe, a Will does not avoid probate. The probate process will be short and simple if the deceased has very few assests at death. But if there is real estate and other assets worth more than $22,000 or so, a full probate will be necessary, including several steps that take 5 or more months, and several thousand dollars in attorneys fees. 

Probate involves notifying potential heirs that there are assets. In a fractious or troubled family, that can be an invitation to a fight. But most often, the probate process goes smoothly, if slowly.

How Can I Avoid Probate?

The glib answer to this question is to not own anything at your death. But by structuring ownership creatively, you can essentially “not own anything” upon your death. This can be accomplished in several ways.

  1. Beneficiary Designations. Any asset that has a beneficiary designation (retirement accounts, some bank accounts, life insurance, etc.) will automatically belong to the named beneficiary on the death of the owner. No probate applies to that asset.
  2. Co-Ownership. Any asset that is owned with someone as joint owners with rights of survivorship becomes the property of the survivors automatically, with no probate applicable. Note though, that some co-ownership may not work that way, so it is important to get advice about your specific situation.
  3. A Trust. A living trust can be created to essentially “own” your assets during your life. Then upon death, the trust (not you) owns the assets and can hold onto them for a while for minor or disabled children, for example, or can distribute to your beneficiaries. Although you exerted control and beneficial ownership during your life, in the eyes of the law, you didn’t really own the assets in the trust, so there is no probate for those assets.

How Do I Choose From These Options?

In this digital age there are many providers eager to help you, including do it yourself products. If you are experienced in tax and real estate issues, you might be ok using those products. Or you can seek the help of an expert to help you create an estate plan that suits the needs of those you will leave behind.

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