An important question is getting lost in the talk of health care reform, advanced directives, and living wills: why would someone even want to tool such as an advanced directive or living will? A common answer is that such planning tools can help you “avoid probate.” However, few people actually understand what it is that they are trying to avoid.
What Is Probate?
In its most basic sense, probate is the court-supervised legal procedure that determines the validity of a will. Probate isn’t necessarily a bad thing, and it can fulfill an important role when it comes to estate planning and distributing property after someone’s death.
As a verb, probate is also used to mean the process of settling an estate (e.g., “probating the estate”). In this sense, probate is the process by which assets are gathered up, applied to pay debts, taxes, and expenses of administration, and then distributed to those designated as beneficiaries in the will.
How Does Probate Work if You Have Property in Multiple States?
Even more than most laws, probate laws vary by state—but which state’s law applies? If you have a second home, your will would be probated in the state of your primary residence.
- Any real estate you own in another state must go through probate in that state unless it's jointly owned or held in a trust.
- If it is jointly owned, the property passes immediately to the co-owner(s), avoiding probate entirely.
What Is the Purpose of Probate?
Despite its sometimes cumbersome nature, probate does help assure that those—and only those—entitled to receive part of your estate do so, even if it takes them a year to get their shares. It reduces the time for creditors to present claims against the estate, True, it is a public proceeding, but how many of us are really worried about someone going through our estate records? Probate privacy, though highly touted by living trust salespeople, is usually more the concern of celebrities and the ultra-rich than the majority of us.
Should You Avoid Probate?
A long-standing legal myth has been that one should always try to avoid probate. however, in recent years, simplified procedures in some states have reduced or eliminated many of the hassles and charges once associated with probate. Though delays remain possible, the average estate completes the probate process in six to nine months, depending on state laws. And the reformed probate procedures in many states now make it possible for your spouse, minor children, and disabled children to obtain the money they need to live on almost immediately, without waiting for the entire estate to clear probate.
How to Avoid Probate
So while probate isn’t necessarily bad, if you can minimize the court’s involvement, you should. Probate avoidance tools include living trusts, joint tenancy, and life insurance. These tools allow some of your assets to be distributed outside of the probate process. Even though you still need a will, it will likely be so simple and dispose of so little property that the cost and time it takes to see it through probate will be minimal.
It is important to note that you can’t simply avoid probate by not having a will. Even if you don’t write a will (which means you die “intestate”), you’ll still have one—the one that the state will write for you
When Is Probate Not Necessary?
Not all property needs to go through probate.
Here’s a partial list of things that don’t:
- Property in trust
- Property that’s jointly held (but not common property)
- Death benefits from insurance policies (unless they are payable to your estate), the government, employers, and other benefits controlled by contract
- Property given away by gift before you die
- Money in a pay-on-death account
- Retirement accounts with a named beneficiary
- Transfer-on-date beneficiary deeds
Why You Should Consult With an Attorney
If you plan to avoid probate, or at least would like to reduce the amount of your property that goes through it, you should work with a lawyer. Don’t make the mistake so many people eager to avoid probate have made: using a one-size-fits-all-estates form from a book or computer program that doesn’t take into account all of your estate planning needs (such as providing for your family) and the peculiarities of your individual situation.
Avoiding probate may be a cost and time-saving goal for you, but before you make any estate planning decisions, it is best to talk with an attorney. Any decisions you make shouldn’t be settled upon only to avoid probate. Rather, they should come about as part of a complete, thoughtful estate plan. You cannot simply “avoid probate” without turning to something else.