What Is Probate? 5 Things You Need To Know

If you’re like many people, the idea of probate can be confusing and uncertain. To start, understanding “what is probate?” is a good place to start. Understanding this process can help you find ways to improve your planning and outcome.

An estate planning professional is a great resource to help guide you through the probate process. With proper planning, you can make it less intrusive for your heirs or even eliminate the court’s involvement. Here are five things to consider.

1. The Probate Process is a Complicated Formality

Probate is a legal process that puts the court in charge of distributing your estate after you die. As with most formal procedures, it’s perhaps more complicated than it should be. When you execute a will, it helps simplify the overall process, but the court remains actively involved.

  • A judge validates your will, approves the administrator, and has final approval over distributing your estate.
  • The court reviews and approves the inventory your administrator compiles.
  • When your estate includes real property or high-value property, the court approves how and when your administrator sells it.
  • If you die intestate—without a will—the court appoints a representative for your estate.
  • Without legal notice of your final wishes, the judge distributes your estate based on protocol outlined by state laws.

2. Probate Gives the Court Control Over Your Estate

You may have many reasons to address probate now instead of later. If you don’t establish an alternate plan, you ultimately give the courts control over the assets you accumulated over a lifetime. Even if you have a will, the process inconveniences your heirs and forces them to wait until the court signs off on distribution.

Here are a few additional reasons why you should take steps to avoid probate:

  • A probate process takes months, and sometimes years, to complete.
  • Significant delays occur when your estate includes real property, business interests, high-value items, unresolved lawsuits, or legal issues.
  • Your heirs will need legal representation to manage paperwork, legal procedures, and court hearings.

3. Probate Costs Reduce Your Estate’s Value

The fees your heirs pay are significant enough to reduce your estate’s worth. Costs often include:

  • Filing Fees and Court Costs: To file your case in probate court, your estate pays a filing fee. The court also receives a fee that’s contingent upon your estate’s value.
  • Attorneys Fees: Courts don’t always require your heirs to have legal representation. As the process is usually too complex for a non-lawyer to handle, it makes sense to hire a professional who understands the procedures and legal issues. Depending on your location, probate attorneys charge a hourly rate plus any fees advanced on the estate’s behalf.
  • Administrator’s Fee: The administrator/executor of your estate receives a fee for their services. They complete an asset inventory, document them for the court, and liquidate assets for easier distribution. Administrators also distribute the estate’s assets when the court approves the division.
  • Fiduciary Bond: The estate pays for the administrator’s fiduciary bond. A bond is an insurance-type instrument that pays for the estate’s losses should the administrator commit a dishonest act.
  • Miscellaneous Fees: Depending on your estate, your heirs may incur appraisal fees, real estate commissions, creditor notification expenses, and other miscellaneous fees.

4. Your Estate is Worth More Than You Think

You might never imagine that you have assets substantial enough to consider them an “estate” worthy of protection. Your estate is everything you will own or have a financial interest in when you die. For most people, that doesn’t usually include a multimillion-dollar company or billions in assets. Still, the property you accumulate over a lifetime is often worth more than you assume.

Estates often include real property such as your home or income-producing properties. You may have bank accounts and investments, cars, jewelry, art, collectibles, and family heirlooms. Many of these items increase in value over time. Through the estate planning process, you document your assets and plan ways to pass along as much as possible to your heirs.

5. You Can Avoid or Limit Probate’s Reach By Planning Ahead

You hope to live a long life, but death is rarely predictable. That’s why it’s always important to have a flexible plan in place. It’s essential to protect and preserve your assets for your heirs. Financial planning professionals help you establish a strategy and implement options that meet your needs.

Living Trust

A living trust is a formal arrangement that places your assets in a trust. Your trust document contains instructions for asset distribution and other directives. A trust allows you to relinquish power over your assets while you’re still living. You appoint a trustee with decision-making authority. The trustee assumes control based on your parameters: death, mental illness, incapacity, etc.

You can set up your trust as irrevocable. This means you can’t change your mind once you implement the arrangement. If you prefer to have an arrangement that you can modify your trust, you can set it up as a revocable trust.

Lifetime Gifts

When you give your assets as a gift while you’re still living, you can bypass the probate process. You can pass on gifts to charities or to your family members without executing a living will or a trust. You must comply with IRS guidelines and file IRS Form 709 when required.

Jointly Titled Property

When your property is titled jointly with a spouse or partner, the property doesn’t become part of your estate. A joint owner has survivorship rights. Upon your death, your house, vehicle, or other titled property transfers to the joint title-holder. The title must reflect the appropriate ownership.

  • Joint Tenancy with rights of survivorship: Reflects joint ownership
  • Tenancy by Entirety: Based on a marital relationship

Name a Beneficiary on Your Bank Account

When your bank account has a payable on death (POD) or transferable on death (TOD) provision, you can designate a beneficiary. These provisions function similarly to life insurance policies. Upon your death, your bank pays the funds directly to your beneficiary.

Contact an Estate Planning Lawyer

You can eliminate future probate complications with focused planning. An estate planning attorney can walk you through the options for managing your estate now. As your situation or lifestyle changes, you can revisit and update your plans.

Contact us today to start planning for your future.