What is Probate?
What is Probate?
Probate is a legal procedure initiated by the executor of an estate or the estate’s attorney. During probate, a court verifies your will and authorizes the executor to distribute your assets to your beneficiaries as specified and to pay any estate taxes that may be due.
If there is no will, the process becomes more complicated and lengthy. The court will conduct an administrative proceeding to determine how your estate should be divided, appointing an administrator to follow the judge’s instructions on property distribution.
Why Should You Avoid Probate?
Many people choose to avoid probate for several compelling reasons:
1. Probate can take years to complete, particularly if the estate is complex or the will is contested.
2. The probate process involves various fees, including executor fees, attorney fees, and administrative expenses such as appraiser’s fees. These costs can accumulate quickly, especially if the process is extended.
3. It is public: Probate is a state legal proceeding, which means all details become part of the public record, potentially compromising your privacy.
How Can You Avoid Probate?
To avoid probate, consider implementing these strategies:
1. Maintain a small estate: Many states have exemption levels for probate, offering at least an expedited process for smaller estates. Check your state’s probate estate limits to see if you qualify.
2. Gift assets during your lifetime: By giving away assets while you are alive, you can reduce the value of your estate, potentially simplifying or avoiding probate. This can also help reduce or eliminate future federal and state estate taxes.
3. Set up a living trust: Property held in a trust is not considered part of your estate upon your death. A trustee manages the trust property and is required to distribute it according to the terms of the trust agreement, thereby bypassing probate.
4. Designate accounts as payable on death: Bank and other accounts that are payable on death go directly to your designated beneficiary, bypassing probate. Some states also allow for payable-on-death transfers of real estate.
5. Joint property ownership: Adding a joint owner to your property facilitates its transfer without probate. Options include joint tenancy with right of survivorship, tenancy by the entirety, and community property with right of survivorship.
By taking these steps, you can help ensure your estate is managed and distributed according to your wishes, while avoiding the potential pitfalls and delays associated with the probate process.