Avoiding probate and why you might want to…

Many of my friends and clients don’t know what probate is, and that isn’t necessarily a bad thing.  If you’ve never had a loved one die, you may never have experienced it. Probate is the legal process by which a will is validated. If there’s no will, it’s the legal process of settling a person’s affairs.

How probate works

The process, and when it’s required, varies by state. In some states (like California), probate is automatic.  It involves several steps, including getting a death certificate; identifying an executor or administrator for the estate; identifying assets; paying expenses like debt or taxes; and notifying or paying beneficiaries. If there’s a will, the judge also validates the will. (For a will to be valid, it usually has to have witnesses. Sometimes, the witnesses must appear at probate, and sometimes they can sign an affidavit when the will is signed instead.)

When there’s a will in place, it usually identifies the executor, assets, and beneficiaries, as well as any outstanding debts and obligations. This can make the probate process much easier. However, it’s also possible that someone may contest the will. A child may object if a new spouse is named as executor, for example.

The executor’s job

How involved the job of an executor is depends on the estate. While the executor may be named in the will, and be someone related to the deceased, an executor may also be a professional or appointed by the court.

It’s an executor’s job to take stock of the decedent’s assets — including any that aren’t listed or disclosed in the will. In most cases, this is a simple process, particularly if the deceased individual had an estate plan in place.

The executor is also responsible for taking control of any assets during the probate process, in order to protect those assets, especially if there ends up being any kind of dispute. The executor may be responsible for hiring an appraiser to look at the “death value” of certain assets, though sometimes the court will appoint an appraiser independent of the executor.

In addition to gathering assets, the executor must also notify any creditors that a death has occurred. This includes the bank (if the deceased had a mortgage), but it can also include publishing an obituary so that any unknown creditors have an opportunity to come forward.

Finally, the executor must resolve the estate. This includes paying off debts (and challenging any they view as unfair) and divvying up assets to the beneficiaries. If the will specifies assets go to minors, the executor may be instructed to set up a trust for those assets.

Who pays for probate?

As you can imagine, the probate process can take time to complete, and may require lawyers, court appearances, or both. If this occurs, the legal fees are generally paid from the estate. 

The process can go relatively quickly, but it’s not uncommon for it to take up to a year. In some cases, immediate family members who are beneficiaries can ask the court to release funds during the probate period. (For instance, you might ask a probate judge to be reimbursed for funeral expenses before the estate is settled.)

"Intestate"

If there is no valid will (either because the decedent did not prepare one, or because the court rules the will invalid), the estate is said to be “intestate.”

In this case, any assets left over after debts are paid go to the closest living relative. Who that relative is may vary depending on state law and personal circumstances.

Avoiding probate

While having a will can facilitate probate, it doesn’t get you out of the process. However, there are some assets that are exempt from probate. For instance, some property passes outside of probate, notably life insurance policies, trusts, jointly owned property, and payable-on-death accounts. (Most retirement accounts fall under this category, too, if you’ve named a beneficiary.)

If you want to avoid the probate process and protect your financial details from becoming a part of the public record, consider creating an estate plan that includes a trust. There will still be details to take care of to settle your affairs, but those will fall to whomever you named trustee, versus your executor (though many times this is the same person).  This lets you express your wishes clearly, designate beneficiaries, name a successor trustee, and address other important considerations like guardianship. Creating a comprehensive Estate Plan will help ensure your wishes are properly documented and legally binding.

Contact me today to talk through the details, including what options might make sense for you and your family.

Sources: PolicyGenius, the balance, NOLO, Investopedia