Probate is the process by which a court establishes the validity of a will and recognizes an executor. If there is no will, the probate court will appoint an administrator to handle the deceased individual’s affairs. Probate oversees the payment of taxes and debts, as well as the distribution of any remaining estate assets once all expenses are settled. The probate process takes a minimum of six months (and frequently much longer) after the estate is opened in probate court.
What is the point of probate?
One of the main objectives of the probate process is to give creditors an opportunity to seek payment of any money you owe them and to give your executor time to collect money owed to you. Probate also establishes titles to real estates.
Who is subject to probate?
Estates that include a certain minimum amount of assets are subject to probate. Having a will in place virtually guarantees probate.
Doesn’t a will allow me to avoid probate?
No! In fact, a will virtually guarantees your estate will be subject to probate. However, a will allows you to make decisions regarding who will serve as your executor, raise your kids, manage assets and receive proceeds from your estate. If you don’t have a will (or trust) in place, the court will follow state law to determine how your estate is handled.
What are the disadvantages of probate?
There are many disadvantages to the probate process, including:
- Probate takes a long time – The probate process takes a minimum of six months, but typically lasts at least a year. It can take even longer if matters are complicated by a will contest, a business problem or other unexpected challenges.
- Probate is a matter of public record – Anyone can access the information that passes through probate.
- Probate freezes assets – During the probate process, beneficiaries cannot sell assets. The executor may only sell assets if granted permission by the court.
- Notice of your death must be published – Probate courts require that a certain number of publications notify the public of your death in order to give creditors a chance to make claims against your estate.
- Probate is expensive – The exact cost of probate varies by state, but typically includes the following expenses.
- Court costs
- Executor fees
- Attorney fees
- Publication costs
- Bond premiums
- Insurance costs
- Property maintenance costs
If your estate is subject to probate in multiple states (for example, you live in Kansas and own a vacation home in Colorado), your fees will likely double.
How can I avoid probate?
There are several ways to avoid probate:
- Certain assets are not subject to probate – For example, retirement accounts pass directly to your named beneficiary without going through probate. In certain states, vehicles can also pass directly to a named beneficiary.
- Joint tenancy – Joint tenancy allows you to avoid probate following the first individual’s death. However, there are important estate and tax planning implications that should be considered prior to titling assets jointly. Always consult with your estate planning attorney before making any changes.
- Revocable living trust – A properly funded revocable living trust is not subject to probate.
If you have any additional questions about the probate process, schedule a complimentary, no-obligation consultation and learn more about how Creative Planning can help you.