Meaning of Probate
Probate is the term for a legal process in which a will is reviewed to determine whether it is valid and authentic. Probate also refers to the general administering of a deceased person’s will or the estate of a deceased person without a will. Probate is a legal process that administers the distribution of a deceased person’s assets. The process is overseen by a probate court. This court has the legal authority to decide matters related to wills and estates.
During probate, the court will determine whether the will is valid. They 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.
How Does Probate Work
Whether or not a person has a last will and testament in place at the time of death, any assets that do not pass directly to beneficiaries must go through the probate process. The process, in theory, is quite simple.
Use of deed to Avoid Probate
A transfer-on-death deed is a new and popular tool to avoid probate. If you own property in a state that recognizes TOD deeds, a TOD deed is often the best choice to avoid probate. Unlike life estate deeds and right of survivorship deeds, a TOD deed form avoids probate without sacrificing control. A property owner that creates a TOD deed retains the right to change or revoke the deed during life without the consent of the beneficiaries. A transfer-on-death deed form works like a beneficiary designation on a bank or investment account. The property owner names someone to inherit the property at the owner’s death. During the owner’s life, the owner can change his or her mind. The property owner may cancel the designation, sell the property, or name a different beneficiary or group of beneficiaries. This retained control during life—coupled with the ability to avoid probate at death—makes transfer-on-death deeds an attractive choice for many property owners.
There are several strategic ways you can minimize the stress and pressure of probate for your loved ones, including:
Establish a Living Trust.
As we previously discussed, when you create and fund a Trust, you’re essentially making the Trust the owner of your assets. So when you die, the named Trustee manages, per your guidance, all the assets inside of it.
Give assets to loved ones while you’re still alive.
Reducing an estate’s value can drastically simplify the probate process as well as potentially have positive tax advantages in terms of federal and estate taxes.
Keep your estate small.
The majority of states have an exemption level that will at the very least allow for an expedited probate process in cases where estates are very small in size. You would want to check the maximum amount your state allows for (don’t be surprised if that amount is much higher than you anticipate – limits can be fairly high in some states).
Title accounts POD or TOD.
This can work for bank accounts and some other assets. And in some (but not all) states, it is also a valid way to transfer real estate to Beneficiaries.
Title property jointly.
Jointly owning property means assets can transfer from one person to another without having to go through the probate process. You can hold assets as:
- Community property with the right of survivorship
- Joint tenancy with right of survivorship
- Tenancy by the entirety
Avoiding the delays and costs of probate is much easier than you think. Here are some basic tips to keep more of your estate in the hands of the people who matter most.
1. Write a Living Trust
The most straightforward way to avoid probate is simply to create a living trust. A living trust is merely an alternative to a last will. Unlike a will, which merely distributes your assets upon death, a living trust places your assets and property “in trust” which are then managed by a trustee for the benefit of your beneficiaries. It allows you to avoid probate entirely because the property and assets are already distributed to the trust.
A trust also enables you to avoid the cost of probating a will. One of the main drawbacks of a will is the cost of probating it or passing it through the courts. In probate, there are court fees taken from the gross estate (the amount of the entire estate before the debts are paid out). This fee can often be as high as ten percent of the total estate which often is better used paying trustee fees and burial costs. With a living trust you avoid these court costs all together.
2. Name Beneficiaries on Your Retirement and Bank Accounts
For some, a last will is often a better fit than a trust because it is a more straightforward estate planning document. Yet, just because you have written a will doesn’t mean that all of your assets have to pass through probate. What most people don’t realize is that many of our most valued assets allow us to name beneficiaries. In fact, you may not have realized that the bank account you opened when you got your first job probably enables you to designate a beneficiary that is payable on death.
Though it may seem simple enough, many people don’t take the time to actually name a beneficiary or beneficiaries for their bank accounts, investments and retirement plans. All you need to do to get yourself started is to request and fill out the payable on death forms that your brokerage company or bank can provide. Remember, if you are married, some of these accounts automatically may be partially owned by your spouse. By taking the time to fill out these forms, however, you ensure that the proceeds are immediately dispersed at death without having to pass through probate, sparing a lot of time and a lot of expense.
Do you have more questions about Probate? Our attorneys are ready to give you all the help and answers you need. Call us today.
Is probate the same in every state?
No, Probate laws differ across the country, so it’s important to be familiar with your state’s mandates so your final wishes can be administered efficiently.
Should I avoid probate?
Although probate is often straightforward, many people want to avoid it for different reasons and some common complaints about the process like it’s cost nature and fact that it is very slow.
Why Should You Avoid Probate?
The probate process can last from six months to two years. It will also cost various filing fees, publication charges, and attorney fees, and if probate drags on, these fees will continue to go up.