Probate

What assets go through probate?

Typically, a person’s entire estate, i.e. everything they own, will go through probate, but there are some exceptions. Life insurance policies, bank accounts, and retirement funds can be configured to avoid probate, but depending on the circumstances more steps may be necessary or advisable. Assets in a trust also do not go through probate but are governed through the terms of the trust.

What is probate?

Probate is the legal process of making sure the inheritance of a deceased person’s estate is distributed to the correct heirs and that all the terms of the will are fulfilled. In probate, a last will and testament is verified to be legal, then carried out per the deceased person’s wishes. If there is no last will, the distribution to heirs is decided based on the default allocation under the law.

How long does probate take?

For small estates, it may take only months, but for large estates, it could take years as it is public and can be contested.

Key Points Regarding Probate

1

If a person dies without a will, the probate court will decide who are the rightful heirs. This decision can be contested. If a will exists, then the probate court will verify its legality. The will directs probate, but it can be contested. Probate opens a will to public scrutiny.

2

Steps of the probate process include:

Verifying the death certificate

Petitioning the court to become executor of the will, or if there is no will, then administrator of the estate

Identifying the assets of the estate

Notifying beneficiaries and distributing assets.

3

During probate, creditors are notified of decedent’s death, and sale of assets can be used to repay debts. In addition, taxes must be paid from the estate, including property, income and estate taxes.

4

During probate, creditors are notified of decedent’s death, and sale of assets can be used to repay debts. In addition, taxes must be paid from the estate, including property, income and estate taxes.

Avoiding Probate

The cost of probates vary per estate, but it can cost up to 10-15 times what a trust administration would have. Having a will alone will not enable you to avoid probate. If the decedent has a living spouse, the spouse may have a right to claim a portion of the assets in the estate without going through probate. Any person that holds assets jointly with the decedent may be able to become sole owner of those assets without going through probate.

Some assets can avoid probate under the right conditions, referred to as nonprobatable assets. These include:

Life insurance death benefit which pays directly to a named beneficiary
Payable on death accounts which are checking, savings, or retirement accounts with beneficiaries assigned
Assets in a trust which are governed by the trust’s terms.

Even nonprobatable assets may be best handled by placing them in a trust. We can help you determine when to use each option.