Probate: What Is It Anyway?

Probate is a series of legal processes that dispose of a decedent’s estate. Like most legal processes, it can be imposing. But there are ways to make it easier and possibly even skip it altogether, if you prepare in advance.

Probate includes taking note of a will or trusts, inventorying and appraising any property, and notifying any beneficiaries. Hopefully, the deceased wrote a will and appointed an executor to take care of these tasks. If there is no will, the court will appoint an administrator to manage the estate. The executor or administrator will have to take note of any outstanding debts — generally, creditors have about a year to make any claims — and file a final income tax return. Depending on the size of the estate, federal and state estate tax returns may also be necessary.

Once the debts are settled, the executor will distribute the estate as outlined in the will. Since the heirs are named in the will, notifying them and then distributing the assets is usually not difficult. Unlike in the movies, you don’t need to gather everyone around a large mahogany table in a lawyer’s conference room; a phone call or an email usually suffices.

However, the overall job of gathering the papers and processing all the information can be a time-consuming task. For most estates, it can take up to a year — and even longer if the estate is complicated.

Can probate be skipped?

If you prepare in advance, there are ways to make sure your estate partially or even entirely avoids probate. State law typically governs probate rules, and some states exempt small estates from probate. Others may allow a portion of the estate to avoid probate or go through with a simplified procedure. Property held in a joint tenancy automatically gets transferred, bypassing probate. The money in pension plans, life insurance proceeds, 401(k) plans, medical savings accounts, and individual retirement accounts skips probate as well, provided a beneficiary is named.

Sometimes, you can convert your bank accounts to “payable on death” accounts. You list a beneficiary and, at your death, the account goes directly to that person, skipping probate. In some states, you can even do this with real estate deeds and car registrations.

One of the best techniques to use is a living trust, which legal site Nolo calls an “end-run around probate.” Property held in such a trust is technically owned by the trustee, who distributes it after your death in the same way your executor distributes property listed in your will. Contrary to popular belief, however, such trusts do not exempt the estate from estate taxes.

Every estate is different, and each state has its own rules. If you are planning your estate, work with your attorney to see whether trusts or other techniques are worth implementing to reduce the probate burden. Advance planning can save your heirs time, money, and aggravation.

Reach out to Roz Carothers and her team at Triplett & Carothers to learn more.