What Is Probate?

If you want to make a will, you have undoubtedly heard about probate and how to avoid it. However, probate is not necessarily bad. It's simply a legal process.

Probate law outlines the requirement for handling a person's estate. It involves paying off a deceased person's debts and properly transferring their property to their heirs and loved ones.

Essentially, a probate court looks for new owners for your property after you die. If you do not name them in a will, a probate court must take the time to find owners for the property.

But there are disadvantages to probate. A probate proceeding can be costly and take a significant amount of time. However, the more you learn about probate, the more you can plan to expedite the probate process or avoid it.

What Is Probate?

Probate is a court-supervised procedure of proving that a will is valid. Probating a will is the first step in administering a deceased person's estate. The probate process involves:

• Authenticating a will
• Filing tax returns
• Paying off debts
• Paying any estate tax owed
• Paying expenses, such as funeral costs and legal fees
• Distributing assets to beneficiaries

Depending on the estate's value, the estate can go through a simplified probate procedure.

Estate Administration Without a Will

If the deceased person dies without a will, they die "intestate." The court follows state intestacy laws to distribute the decedent's assets. This process will initiate in probate court.

Probate With a Will

If the deceased person has a will, the court determines if the will is valid and authentic. Then, the court appoints a personal representative. In most cases, the court appoints the person named as a personal representative in the will to administer the estate.

How Does Probate Work?

There are several steps to the legal probate process:

1. Submit a Death Certificate

First, an executor or representative of the estate will start the probate process. They typically file the death certificate and the will with the probate court. If there is no will, then the decedent is intestate. The court initiates procedures for intestate probate. These procedures take longer than if there is a will. If there is a will, the process is more streamlined.

2. Validate the Will

If there is a will, the court authenticates the last will and testament to ensure it is the actual will. The court determines if the legal document is the intended will of the deceased. The testator is the person who executes the will.

The court will also check that the will complies with state law. This may include ensuring the will contains required witness signatures and a notary stamp.

If your will has a "self-proving" affidavit, this will speed up the probate process. Witnesses sign this affidavit in front of a notary. The self-proving affidavit states that the will is authentic. This eliminates the need to have witnesses testify to the will's authenticity in court.

3. Appoint a Personal Representative

The next step is for a probate court judge to approve someone to administer the estate. The judge appoints the executor or personal representative named in your will. If there is no will, the judge will appoint someone. The court usually appoints a family member to handle the estate.

The personal representative serves as a fiduciary to the estate and beneficiaries. This means that the personal representative owes a fiduciary duty to them and must act in their best interests.

The personal representative will receive "letters testamentary." Letters testamentary signify that the probate court gives the personal representative legal authority over the decedent's estate. The personal representative uses these letters to manage the estate administration. This legal document will allow the personal representative to contact banks and attorneys on the estate's behalf.

4. Post a Bond

A personal representative likely will handle money, property, and assets. Thus, the court may require the personal representative to post a probate bond. The estate pays for the cost of the bond. However, you can waive the bond requirement for your personal representative in your will. This will save your estate an additional expense.

5. Alert Creditors and Beneficiaries

The personal representative now has the task of identifying beneficiaries. They must also notify creditors of the probate administration. The creditors then have a specified time frame to submit claims against the estate. They can only collect on those claims if they respond during that time.

6. Appraise Property and Assets to Determine the Estate's Value

The personal representative also must determine the value of all probate assets. That may mean the personal representative must:

• Obtain real estate appraisals
• Make an inventory of personal property
• Value assets

The personal representative may hire appraisers to determine property values.

7. Pay Valid Debts

The first debts usually paid from your estate are funeral expenses, last illness expenses, and taxes. The personal representative then pays any valid creditor claims. The personal representative can dispute or settle creditor claims on behalf of the estate.

8. Distribute Assets to Beneficiaries

The personal representative distributes the remaining assets after paying estate debts, taxes, and claims. The personal representative distributes the remaining assets to the named beneficiaries. Without a will, your heirs receive distributions according to state intestacy laws.

9. Close the Estate

The personal representative files a final accounting with the court to close probate. The final accounting reports all the assets of the estate. The report also includes all income generated on those assets. The report details all debts paid and distributions made to beneficiaries or heirs.

When the court accepts this report, they discharge the personal representative from their probate duties. The court formally closes the probate estate.

What Goes Through Probate?

It is helpful to understand what property qualifies as probate property. Property and assets only in your name are part of your probate estate. For example, if you owned a house titled exclusively in your name, that home's value adds to your probate estate total.

Many assets transfer outside probate. A bank account with a "payable on death" or "transfer-on-death" (TOD) designation is one example. If you name a transfer-on-death beneficiary, they receive the bank account upon death. Therefore, it does not go through probate.

Similarly, life insurance benefits go directly to your named beneficiaries. Thus, the life insurance proceeds are not part of your estate.

Other property and assets that don't go through probate are:

• Bank and investment accounts with transfer-on-death beneficiaries
• IRA and retirement accounts with transfer-on-death beneficiaries
• Real estate owned in joint tenancy
• Life insurance policies with named beneficiaries
• Lifetime gifts and distributions
• Any property held in a trust

Examples of property or other assets that go through probate are:

• Any bank or financial account, stock, or retirement account in your name only
• Real property titled in your name only
• Cars, boats, or RVs titled in your name only

Beware, however, if you fail to name a beneficiary on any accounts, those accounts will fall into your probate estate. Additionally, suppose a beneficiary you name on an account dies before you. In that case, that account may not have an owner and become part of your probate estate.

Again, a probate court handles property that does not have a named owner. With planning, you can significantly reduce your probate estate.

How Long Does Probate Take?

Probating a simple estate with no issues can take several months to over a year. However, if there is a will contest or a large estate, it can take two years or longer.

How Much Does Probate Cost?

There are many fees and expenses involved with probating an estate. Typically, probate costs range from 3% to 5% of the estate's value. Here are some examples of the fees and expenses associated with probate:

• Filing fees: The court charges these fees to open an administration, provide letters testamentary, and close the estate. The costs could range from $35 to hundreds of dollars.

• Probate bond fees: This is a fee that the court charges your estate for the personal representative to acquire a bond. However, you avoid this by waiving the bond fee requirement in your will.

• Attorney and personal representative fees: Many states provide guidelines for how much a personal representative or attorney can charge. Some states set the fees based on a percentage of the estate.
  • For example, in California, if your estate is worth $200,000, your estate may pay $7,000 in standard probate fees. California also allows an attorney and a personal representative to collect fees.
  • Generally, friends or family members who serve as your personal representative waive the fee. However, they are still entitled to it.

• Reimbursement fees: Your personal representative gets reimbursement for out-of-pocket expenses for managing your estate. For example, they may hire appraisers, movers, accountants, or other professionals to administer the estate.

How Can I Avoid Probate?

The best way to avoid probate is by not owning any probate property at death. That way, your estate can qualify under your state's simplified probate procedure. You can skip a long, drawn-out expensive probate process by filing affidavits with the probate court.

Here are four ways you can avoid probate:

1. Title Your Real Property With a Joint Owner

Owning a property with another owner can take your interest in the property out of your probate estate. But it must be titled properly. When you die, the ownership of the property automatically transfers to the surviving owner. Those ownership types are:

• Joint tenancy with right of survivorship: This is property owned by all the owners. When one of the owners dies, the property goes to any surviving owners.

• Tenancy in the entirety: Valid in some states, this is property ownership only between husband and wife. If one dies, the surviving spouse receives the property outright.

• Community property with right of survivorship: Community property states recognize this form of property ownership. It is ownership between spouses. The surviving spouse receives the property once their spouse dies. The property is not part of the deceased spouse's estate.

2. Establish a Revocable Living Trust

A revocable living trust is a legal structure to bypass probate. It gives your property and assets to others. When you title property in the trust's name, the trust becomes the owner of the property. It is no longer considered part of your estate. But you can still use the property for your benefit.

After your death, you can instruct your trustee to distribute the assets to your beneficiaries. Or the trustee can hold the assets until your beneficiaries become adults. With a revocable trust, you can move property in and out of it during your lifetime. You can also revoke the trust altogether.

3. Name Beneficiaries

Make sure you name beneficiaries. As discussed above, some assets can pass outside of the probate process. Designate beneficiaries on all your bank, retirement, and investment accounts. Do the same for any life insurance policies. In addition, have backup beneficiaries listed. This will protect you if your first named beneficiary predeceases you. Keep these beneficiary designations up to date.

4. Give Away Property During Your Lifetime

The less property you own individually, the less probate property you have. You can give gifts to charities, family members, and friends to reduce your estate.

How Can I Speed Up the Probate Process?

If you can't avoid probate entirely, you can reduce the length of the probate process. You can significantly reduce the time it takes to go through the probate process by taking the following steps:

1. Make a Will

Have a valid will signed according to your state's laws. If you have a will, you have named beneficiaries for your probate property. A court does not have to go through intestate succession laws. In this case, the court knows all beneficiaries.

2. Use a Self-Proving Affidavit

Use a self-proving affidavit if your state allows it. This means the will is authenticated. The court does not have to contact the witnesses to testify about the will's authenticity.

3. Reduce Your Probate Estate

Reduce the size of your probate estate by following the steps above. The smaller your estate, the more likely you will fall into a simplified probate procedure. Most states provide streamlined estate administrations for small estates.

For example, in 2023, if your estate was less than $184,500 in California, you could skip formal probate. Instead, the personal representative files affidavits to the court.

In Conclusion

The more you know about probate, the more you can plan to streamline or avoid it. You can save your family considerable time and money with the help of a local estate planning attorney. An estate planning lawyer can help you develop a comprehensive estate plan that meets your needs.