I spend a lot of time designing estate plans for people to avoid probate. What is probate and why do we want to avoid it?

What is Probate?

First of all, probate isn’t necessarily a dirty word. It’s exists to protect you in a way. Probate is the court supervised process to appoint an executor, also called a personal representative, over your estate. Your personal representative can then make sure that your creditors are paid and that your estate is distributed to the proper heirs.

Think of it this way, when you pass away, your children can’t just go to the bank and take your money out. Nor can they change title of your home to their name(s). This is a good thing. We don’t want our bank to allow anyone to have access to our personal accounts. But after we pass away, someone will need to gain access. Probate is how this happens. Your executor (personal representative) has court granted authority and documentation to be able to act on behalf of your deceased self (your estate) to make sure that things are carried out in an organized fashion.

Did You Have a Will?

If you have a will when you pass away we call it “Testate.” If you don’t have a will we call it “Intestate.” If you die Intestate, someone (usually a close relative such as spouse or child) will petition the probate court to be appointed as your personal representative. State law will dictate who your closest heirs are when determining how to divide your estate. If you die with a will (Testate), your chosen personal representative files your Will with the probate court. Your personal representative then carries out the terms of your Will.

What Assets are Subject to Probate?

The short answer is that all assets in your estate are subject to probate upon your death (unless you proactively do something to avoid it). There are some assets that incorporate simple ways to avoid probate such as beneficiary designations on life insurance policies or retirement accounts. There are also some assets that can be more difficult. Real estate is one of the main assets that is subject to probate regardless of its value. Note that you can hold real estate in “joint tenancy” so there is no probate on the death of one of the owners, but when the second passes away the real estate is subject to probate.

Should You Avoid Probate?

While probate ensures that your assets go to those who you designate in your Will (or your nearest heirs if you don’t have a will), it is still worth avoiding for a few reasons. Probate can be time consuming, expensive, and is public. Having a Will is better than not having a Will, but you can save time, money, and keep your estate planning private by planning in advance with foundational estate planning.

How to Avoid Probate?

There are several ways to avoid probate.

  1. Contract Beneficiary Designations – Certain types of assets/accounts allow you to designate beneficiaries. These pay directly to the named beneficiary without probate. This includes Life Insurance, Retirement Accounts (IRA and 401k etc.), and even Bank Accounts.
  2. Revocable Trust – In combination with beneficiary designations, a Revocable Living Trust is the most popular comprehensive estate planning tool. If you transfer assets into a revocable living trust during lifetime, those assets will not go through probate upon your death.

Peace of Mind

Take control of your estate planning by being proactive. You can save your heirs time, money, and unwanted publicity as well as living with peace of mind that your plan will be carried out the way you want.

Video coming soon…