Understanding when probate is necessary

Whether or not you have an estate plan in place, you have likely heard people talk about “probate”. Probate is the legal process used to distribute a deceased individual’s assets under court supervision. This process is sometimes necessary to distribute assets that are solely in the name of the deceased person. Probate is governed by state law so understanding when probate is necessary is important in the estate planning process.

Avoiding Probate

One of the potentially appealing aspects of putting together an estate plan is the possible avoidance of probate. One way to avoid the probate process is to ensure that no assets will be titled in the decedent’s name, or providing for an automatic transfer of title, at death. Ways to accomplish this include joint tenancy with rights of survivorship, beneficiary deeds/transfer-on-death (TOD) or payable-on-death (POD) beneficiaries, or use of a trust.

Joint ownership is easy to create and transfer property; however, this solution provides its own set of concerns. TOD and POD accounts can be efficient because, upon the property or account owner’s death, they immediately transfer the account or property, outside of probate, to the named recipient.  They are easy (and typically inexpensive) to set up. It is important to note; however, that in this case, the account is transferred to the beneficiary outright without any creditor protection. Another popular and efficient way to avoid probate is the use of a trust. If you place your assets in a trust, the trust, not you, owns them even though you can control these assets and benefit from them as if they were yours during your lifetime. Accordingly, the assets do not go through a court probate because only property owned by the decedent goes through this process.

Note: If your estate planning consists of just a will, this document must still go through the probate process. However, a will at least provides you with the ability to determine who will get your assets - as opposed to letting the court decide for you.

Benefits & Downsides of Probate

While there are numerous estate planning tools that can be used to avoid probate, it is not always a bad thing. A probate court can ensure that your intentions and wishes listed in your will are honored after your passing. Additionally, probate guarantees all presented debts are discharged, as well as any outstanding taxes on the estate. This, in turn, results in finality to the affairs of the deceased - and surviving family members. Of note, if the deceased had outstanding debt, the probate process gives creditors only a brief window to file a claim against the estate, which could result in more debt forgiveness if there is a concern about the estate being insolvent.

That being said, there are downsides to the probate process. One such downside is the cost.  Due to the filing fees and costs that can be associated with the process of preparing an inventory and appraisement required by the probate courts, this is an additional expense that can deplete the estate. Also, the probate process can be very time consuming. For example, probate must be open for a minimum period of time (in many states it is at least four months) to permit creditors to file claims against the estate. For most uncomplicated probate estates, it will take a minimum of nine months to a year to administer. Additionally, the lack of privacy can be a concern for some families.  The contents of your will, and any other documents that have to be filed with the court, will be a matter of public record.  Any disgruntled family member wondering how your estate was divided up or scammers seeking to bilk your family members, will have the ability to access the probate documents filed with the court. Lastly, the probate process can take control away from the deceased and the family. This is because, if you do not have a will, the probate process puts the disbursement of a deceased’s assets in the hands of the court and at the mercy of state intestacy law.

Get Advice

If you have questions about the probate process and intestacy laws, feel free to visit our website or give us a call to schedule a free 30-minute consultation. No matter if you have a little or a lot, understanding when probate is necessary will help you create a well-crafted estate plan that can avoid probate and make sure your loved ones are taken care of when you are gone.