Probate is the legal process in which a court oversees the distribution of a deceased person’s assets. While it ensures that everything is done according to the law, probate can often be expensive, time-consuming, and stressful for the family. Many individuals seek to avoid probate to minimize these challenges.
What is Probate?
Probate is a court-supervised procedure used to settle a deceased person’s estate, which involves authenticating a will (if one exists), identifying the deceased’s assets, paying debts and taxes, and distributing the remaining property to the rightful heirs. Assets that typically go through probate include bank accounts, real estate, investments, and other properties the deceased owned before their death.
The probate process differs depending on whether the deceased left a will (testate) or died without one (intestate).
Probate With a Will
When a person dies with a valid will, they are referred to as the testator. The will usually names an executor who is responsible for initiating the probate process. This executor files the will with the probate court, which starts the legal process. The court authenticates the will and approves the executor’s authority, giving them legal power to act on behalf of the deceased.
After receiving court approval, the executor must:
- Notify all heirs, beneficiaries, and creditors about the probate process.
- Create an inventory of the deceased’s assets, including those that may require professional appraisals.
- Settle any outstanding debts and taxes owed by the estate.
- Distribute the remaining assets to the beneficiaries as specified in the will.
The timeframe for filing the will varies by state, and it’s essential to follow state laws to avoid legal complications.
Probate Without a Will
If a person dies without a will, they are said to have died intestate. In this case, the court appoints an administrator to handle the estate, similar to the executor in cases with a will. The administrator may be a family member, or, if no suitable family member is available, the court may appoint a third party.
The process for intestate probate is similar to probate with a will. However, since there are no explicit instructions from the deceased, the court distributes the estate according to the state’s intestacy laws. These laws typically prioritize close relatives, such as spouses, children, and parents. The main disadvantage of dying without a will is that the deceased has no say in how their assets are distributed; state laws decide who inherits what.
The Cost of Probate
The costs associated with probate can range from 3% to 10% of the estate’s value, depending on several factors like the complexity of the estate, state-specific laws, and whether legal assistance is necessary. Some of the common costs include:
- Court Costs
Probate involves filing fees, which vary depending on the estate’s size and complexity. Disputes over the will or a lack of a will can increase these fees due to additional paperwork and hearings.
- Executor Fees
The executor named in the will is entitled to a fee for their services. This fee is typically based on a percentage of the estate’s value or is determined by an amount specified by the decedent in the will.
- Attorney Fees
If the estate is large or complex, an attorney may be necessary. Attorney fees can either be state-mandated or based on the attorney’s workload and the estate’s complexity.
- Appraisal Fees
As mentioned earlier in this article, some real estate and valuable personal property may require an appraisal to determine the fair market value of the asset, adding to the overall cost.
- Miscellaneous Costs
These include administrative expenses such as postage, notifications to creditors, travel, and other smaller fees.
The Time it Takes for Probate
The probate process is not only expensive but time-consuming too. The time it takes depends on several factors such as the size, complexity, legal requirements, and number of disputes involved with the decedent’s estate. The average time it takes to complete the probate process can range anywhere from six months to two years, or even more in some cases. The timeline is dependent on the following factors.
- Debts and Creditor Claims
If the deceased had substantial debts, settling those debts can slow down probate. Creditors are often given a certain amount of time (depending on state laws) to make claims against the estate, which can delay the process.
- Estate Complexity
Large or complicated estates, such as those with businesses, multiple properties, or foreign assets, may require more time to settle, especially if these assets need to be valued.
- Disputes and Contests
If the will is contested, or if there are disputes among family members about the distribution of assets, the probate process can be prolonged. These legal battles can last for years in extreme cases.
- Estate Taxes
If the estate is subject to federal or state estate taxes, they must be paid prior to the completion of the probate process, which may take additional time.
Ways to Avoid Probate
Given the time and costs associated with probate, many people use legal strategies to avoid it, ensuring a faster and less expensive transfer of assets to their beneficiaries. Below are some of the most effective methods for avoiding probate.
- Living Trust
A living trust is one of the most common methods for avoiding probate. In this arrangement, you transfer ownership of your assets to the trust during your lifetime. Upon your death, the assets are distributed to your beneficiaries according to the terms of the trust without going through probate.
- Joint Ownership
Joint ownership arrangements, like joint tenancy with right of survivorship or tenancy by the entirety, automatically transfer ownership of property to the surviving owner upon death. This avoids probate because the property never becomes part of the deceased’s estate.
- Transfer-On-Death (TOD) Accounts
You can set up certain financial accounts, such as brokerage or bank accounts, as transfer-on-death. When you pass away, the assets in these accounts are automatically transferred to the named beneficiary, bypassing probate.
- Beneficiary Designations
It’s essential to name beneficiaries for accounts like life insurance policies, retirement accounts, and annuities. When you pass away, these assets go directly to the beneficiaries, avoiding probate entirely.
Probate can be an expensive and time-consuming process, but there are ways to avoid it with proper planning. Creating a living trust, using joint ownership, and naming beneficiaries are all effective strategies to ensure your assets are distributed according to your wishes, without the delays and costs of probate. Taking these steps will help protect your loved ones from unnecessary financial burdens and stress during an already difficult time.
Presented by Jack Russell
