What is probate?
Probate is a legal process using the court system following your death where your Personal Representative settles your estate. The following occur in probate:
- Your Will is filed with the court
- An inventory of your estate is made
- Appraisals of property may need to occur
- Debts are paid
- Taxes are file and paid
- You Will is proven to be valid
- Your heirs are given notice
- Your assets are distributed to beneficiaries
Probate generally takes over a year, which gives time for the above steps to occur, as well as time for creditors to collect (creditors have four months if publication of notice, and up to two years if no publication).
What assets are affected by probate?
Assets can be transferred to your beneficiaries upon your death in 2 different ways depending on what type of asset they are. First, some types of assets (see the assets listed in the left column below) are transferred directly to your beneficiaries based on the beneficiary designation you put on those assets. On the other hand, some types of assets (see the assets listed in the right column below) must go through probate, a process in which a court determine what your intentions were based on your will (or the rules of intestacy if you have no will).
Do I want to avoid probate?
It depends. Assets that go through probate will generally take longer to get to your beneficiaries. Also, probate can be expensive (attorney fees, filing fees, etc.) and a hassle for your Personal Representative. However, probate can be a good thing- especially if you have significant unusual debts, pending lawsuits (or potential professional liability), or a failed business. Also, very small estates have simplified (and therefore cheaper) procedures to follow. Families that are unclear on the entire financial picture of the estate may also want to go through probate to have the court sort everything out for them.
How can I avoid probate?
Use Proper Beneficiary Designations. First, a lot of your assets (see the list in the left column above) already avoid probate, if you have done your beneficiary designation correctly. However, most people will not correctly list their beneficiaries. For that reason, sometimes these assets will end up going back through probate or will not go to the beneficiary you intend. It is essential you check all of your beneficiary designations to make sure they align with the estate planning we do.
Transfer Assets to a Living Trust. Second, other assets that normally go through probate can avoid probate if you transfer ownership of them from your name into a revocable living trust. This trust will generally be called something like "The Smith Living Trust." This trust is a fairly simple way to avoid probate, and is frequently used for out-of-state property (to avoid going through probate in 2 states).
Change the Ownership Form of Jointly Held Assets. Finally, some assets that you hold jointly as “Tenants in Common” can be converted into an ownership form called “Joint Tenancy with Rights of Survivorship.” These assets would then pass directly to the other owner (a.k.a. the "joint tenant") upon your death, and vice versa. This is an easy solution when you want your spouse or RDP to receive the assets outright, but is not an available option for many types of assets. A Community Property Agreement can also be useful tool. These ways of changing of ownership will generally override your will provisions, so it is essential to discuss this with me prior to making these changes.
How do I control who gets my probate assets since there is no beneficiary designation for those assets?
A Will states your intention for who gets most of your probate assets (in addition to who you want as your Personal Representative). However, for some assets, like your pets and furniture, you must create a list of these outside of your will. Since this list doesn’t need to be witnessed, it’s a good idea to write it out in your own handwriting (to show that you really created it).
