What is probate?
Because it’s a legal process associated with death and money, many people find probate, the legal acceptance of a will’s division of assets after death, intimidating. They think of it as a long, painful process fraught with family disputes, dramatic disinheritances, and unexpected financial revelations.
But is probate really as complicated and overwhelming as some make it out to be? Learn what it is, how it works, and — most important — how to prevent it in your estate planning.
What Is Probate?
Probate is the legal process that settles your legal and financial matters after you die. In other words, it’s how a court determines how to distribute your assets and close your estate.
The probate process differs based on whether you die without a will (intestate) or not.
Probate With a Will
If you die with a will, the probate process can be relatively straightforward. Your estate plans may still need to be reviewed by a court to determine whether the will was valid and appoint or confirm an executor (also called a personal representative).
After that, it’s the executor’s responsibility to locate and record your assets and debts. In some cases, the law may require them to hire an appraiser and submit an inventory of the assets to the court.
Some courts or states may require them to post a probate bond, which is like an insurance policy you buy from a surety company. It ensures the executor doesn’t abuse their power or run off with the money. If they do, the surety company covers the debt until it can get its money from the executor.
From there, they must pay your debts and distribute your estate as indicated in your last will and testament and pay your estate taxes. You can resolve a straightforward estate with a clear and valid will in as little as a few weeks.
How much involvement a court has in the distribution of your estate depends on your assets, debts, and beneficiaries. For example, if your estate qualifies for small-estate probate, it may be entirely exempt from the probate process. However, it varies greatly by jurisdiction, with some states limiting small-estate probate to an estate worth $500 and others setting the limit at $200,000.
If there are disputes about your assets, debts, or beneficiaries, it’s likely your estate will have to go through traditional probate. Depending on the extent of the disputes and the value of the estate, the court may choose to oversee and supervise the distribution of your assets and closing of your estate.
During the formal probate process, your executor may have to submit paperwork, attend hearings, and even request court approval for certain actions.
Probate Without a Will
If you die without a will, the probate process is much more involved. Since you left no indication of who your beneficiaries are or how you’d like your estate distributed, the courts must do their best to determine how to close your estate as per your preferences.
For example, if you die intestate, the probate process may include having a court:
- Select an executor
- Create an inventory of your assets and outstanding debts
- Determine who your beneficiaries should be
- Supervise and approve executor actions
- Liquidate assets and pay debts
It’s often a lengthy and complicated process since family members may have conflicting opinions about how to distribute your assets. The courts get much more involved in probate administration than if you had died with a will. If your loved ones argue about your estate assets, the process can go on for years.
And the court can’t consider your personal preferences if they aren’t documented. For example, if you wanted to leave a gift to a charity, the court would not be obligated to do so without having formal instructions in a will.
Which Assets Go Through Probate Court?
Whether or not your estate has to go through probate also depends on the assets you have. Some assets that typically have to go through the probate process are:
- Assets the deceased person solely owned (like a bank account, car, or real estate)
- A share of a property that the deceased person owned with someone else as part of a joint tenancy or tenants in common (like a retail space or family vacation home)
- Any assets not left to a specific beneficiary
Any assets that only include your name on the title usually have to go through probate whether or not you were married. While the courts typically release the asset to your surviving spouse, they’re not automatically entitled to it.
If you jointly own a property with your spouse, called joint tenancy, they’re entitled to the right of survivorship. That means your stake in the property will be transferred to your spouse when you die, with or without a will. However, the court still has to review and transfer it as part of the probate process.
That also applies to any assets you owned with someone other than your spouse.
Which Assets Bypass Probate Court?
Not all of your assets are subject to probate proceedings. Many bypass the process entirely, such as:
- Payouts from life insurance policies
- Pension plan distributions
- Retirement accounts, like a 401k or IRA
- Vehicles left to immediate family members
- Basic personal property, like household goods left to immediate family members
- Salaries, wages, and commissions owed to the deceased
- Any property in a living trust
- Community property with the right of survivorship
- Property in which you and your spouse both own equal, undivided shares (called “tenancy by entirety”)
Whether or not assets have to go through probate depends on the estate and probate laws in your state. For example, in some states, any jointly owned real estate properties qualify, while it only refers to the homestead property (residence) in others.
If you have a large or complicated estate and you’re hoping to avoid the probate process, seek legal advice through an estate planning attorney. They can give advice on how to best distribute your estate to avoid probate and have a legal obligation to work in your best interests.
How the Probate Process Works
Whether or not you died with a will, your estate is still subject to the probate process. While it varies based on your assets, where you lived, and whether you died intestate, probate typically entails the following steps.
1. Your Executor Files Your Will With Probate Court
In most states, whoever is in possession of your will, such as your executor, has a legal obligation to submit it to the local probate court as soon as they can. State law may also require them to submit a death certificate.
At the same time, they will file a petition to open probate of the decedent’s estate.
2. The Court Validates Your Will
If you died with a will, the court must validate it. Sometimes, that involves holding a hearing, which all beneficiaries and heirs can attend. They have an opportunity to object to the will or present any others they may have — for example, if someone has an updated version or wants to dispute any aspects of the deceased person’s estate.
The court may ask witnesses to the will to confirm they saw you sign it unless the executor can provide a self-proving affidavit, which is a notarized legal document that confirms the witnesses were present at the signing. That keeps your witnesses from having to attend the hearing and ensures there are no complications if one of your witnesses dies or can’t be located.
3. The Court Appoints an Executor
Next, the court appoints an executor to oversee and close your estate. If you had a will and named an executor, the court will likely appoint them to handle your affairs if they’re still willing to act on your behalf.
If you died without a will, the court will choose someone suitable to manage your estate, such as a family member, friend, or attorney.
4. The Executor Locates Your Assets
After the court appoints an executor, their first job is to locate and record all your assets. That can involve paying your mortgage and other bills to protect and maintain your assets during probate.
If you have a will, ensure it lists any and all assets.
If you die without a will, this step can be long and arduous since your executor may be unaware of all of your remaining assets. That means they have to search to find them, dragging out the process.
This step may also involve hiring an auditor to inventory your estate to determine how much your assets were worth at the time of your death. State law may require your executor to submit a complete list of your assets to the court along with their individual values.
5. The Executor Determines Your Debts
Aside from locating your assets, your executor must also identify all your debts — for example, loans, credit cards, and unpaid taxes.
In many states, your executor must publish an obituary in the paper to notify any unknown creditors of your death. How much time they have to notify your executor of an outstanding debt depends on the state you died in.
From there, your executor pays any outstanding debts using funds from your estate.
6. The Executor Files Your Tax Returns
After your executor locates your assets and pays your debts, they must prepare and file your income tax returns for the year you died. That’s how they determine whether or not your estate owes estate taxes, which they must pay from your estate.
7. The Court Approves the Distribution of Your Estate
After your executor identifies assets, pays off debts, and files your taxes, they must request permission from the court to move forward with distributing your estate to your named or court-appointed beneficiaries.
In some states, your executor may have to provide a detailed account of your estate and any associated expenses before the court grants permission.
Once the court approves, your executor can move forward with allocating your assets and any specific gifts to your chosen recipients.
After they complete this step, the government considers your estate closed.
How to Avoid Probate
Certain assets, such as trusts, retirement plans, and owed wages, bypass probate. But those aren’t the only ways to avoid the probate process.
You can take several steps to ensure your beneficiaries inherit your assets quickly and without issue.
1. Designating Beneficiaries to Certain Assets
If you have life insurance policies or retirement accounts, ensure you designate a beneficiary. It’s the only way to bypass probate.
2. Establish a Trust
Since assets in a trust bypass probate, creating a trust that holds specific assets is another way to avoid probate. The assets held in a trust are subject to the terms of the trust, keeping them separate from your estate during probate.
3. Give Your Assets Away Now
If you give your assets to beneficiaries before you die, they’re not subject to probate. For example, valuable heirlooms, real property, and monetary gifts are all things you can give away now to avoid probate in the future.
4. Stay Within Your State’s Estate Limit
Small estates don’t have to go through probate, but what qualifies as a small estate depends on where you live. The amount varies significantly, from a few hundred dollars to a few hundred thousand. Check the limits in your state and consider whether your estate falls within them.
If not, consider how you can make your estate smaller by creating a trust or giving possessions away.
5. Hold Joint Property
Another option is to hold property jointly with someone else, such as a spouse or family member. When you die, the second property owner may be entitled to inherit your share, depending on inheritance laws in your state.
Although the probate process isn’t overly complicated, wrapping your head around it can seem daunting. Take a look at these commonly asked questions to get the answers you need to ensure you can properly prepare your estate plans.
How Long Does the Probate Process Take?
Depending on whether or not you had a will and whether someone is disputing your estate, the probate process can take anywhere from a few weeks to many years. Having a valid, up-to-date will often results in a shorter process.
How Much Does Probate Cost?
Probate fees are impacted by various factors, such as the state you live in, the total value of your estate, how simple or complicated your estate plans are, and whether or not there’s a dispute.
Probate fees often include:
- Probate attorney and accounting fees
- Court fees, like filing and certificate fees
- Executor fees, such as expense reimbursements and payment for services
- Surety bonds
- Appraisal fees
- Notarization costs
Since these costs are variable, like how much a probate lawyer charges, there’s no set amount your estate will pay for probate. However, you can plan for around 3% to 7% of the value of your estate as a ballpark.
Is Probate Required if You Have a Small Estate?
No, however, what qualifies as a small estate is dictated by your state laws. Check your state’s guidelines to determine whether your estate is a small estate under the law.
While the probate process is relatively straightforward, it’s often overwhelming for your loved ones. And since the government freezes your assets until your estate has moved through probate, your family and friends may have to deal with financial burdens on top of their grief over your death.
By simply creating a valid last will and testament now and updating your estate plans as you move through life, you can make your estate’s probate process faster and easier — or avoid it altogether.
It won’t necessarily make much difference to you after you die. But it will make things easier on those you love and potentially safeguard the value of your assets.