Probate is the legal process of settling an estate after death.
Because it’s a court process, probate records are public. In addition, it typically costs money due to attorney fees and related costs.
Many aim to bypass probate to save time and money. In this guide, you’ll learn what happens in probate court and how to avoid it.
Table of Contents
What Is Probate Court?
Probate court is a way to settle an estate. The court is tasked with resolving a person’s debts and distributing their assets. It can be simple or complex, depending on the type and amount of assets.
Parties involved in probate are:
- Decedent: This is the individual who has passed away and whose estate is going through the probate process.
- Executor: The decedent designates this person in their will to handle their affairs. If there isn’t one, the court appoints a representative.
- Heirs and beneficiaries: These individuals or entities are entitled to certain assets. Heirs are determined by law if there’s no will, while beneficiaries are named in the will.
- Probate court judge: They oversee probate to ensure debts and assets are handled appropriately.
- Probate clerk: This official maintains court records, including all documents filed during probate.
- Creditors: The decedent owes these individuals or entities money, giving them the right to submit claims against the estate.
- Probate attorney: The executor or representative may hire this attorney for legal advice and assistance for large, complex estates.
- Appraiser: An individual who determines the market value of certain the decedent’s assets.
What Is the Cost of Probate?
Probate costs can range from a few hundred dollars to thousands, depending on the complexity of the estate.
Common probate fees can include:
- Court fees
- Probate attorney fees
- Accounting fees
- Probate bond fees
- Executor fees
Probate fees are paid before assets are passed on to beneficiaries and heirs. In cases where the estate lacks sufficient cash, assets may be sold to cover the costs.
When Is Probate Required?
The need for probate depends on the amount and type of property you own and whether ownership is shared. In most cases, probate is mandatory when an individual dies.
Estate matters typically handled by probate:
- Validation of wills: Probate court verifies the authenticity of a deceased person’s will and interprets its instructions.
- Estate administration: Probate court oversees estate administration: collecting the deceased’s assets, paying debts or taxes, and distributing the remaining assets to the heirs or beneficiaries.
- Executor appointments: If a will does not name an executor or there is no will, the probate court will appoint one.
- Guardianship issues: Probate court handles cases involving guardianships for minors or incapacitated adults who cannot manage their affairs.
- Resolution of claims: The court resolves claims by creditors or disputes between beneficiaries about the distribution of assets.
The scope of a probate court can vary from state to state.
When Is Probate Not Necessary?
Estate settlement doesn’t require probate 100% of the time.
- Some states don’t enforce probate for small estates. For example, in Minnesota, probate isn’t required for estates worth less than $75,000.
- Some assets are exempt from probate.
Assets that skip probate include:
- Life insurance: Death benefit proceeds are typically paid directly to beneficiaries.
- Retirement accounts: Assets in retirement accounts, such as IRAs and 401(k)s, typically pass directly to the named beneficiaries.
- Trust assets: Upon the death of the creator of a living trust, the assets held within it are distributed according to the trust’s terms, bypassing the probate process.
- Jointly-owned property: Real estate, bank accounts, and other assets owned jointly with right of survivorship are typically transferred directly to the surviving owner.
- POD and TOD accounts: Payable-on-death and transfer-on-death accounts have designated beneficiaries, and assets are transferred directly to these beneficiaries upon the account holder’s death.
What Happens in Probate Court?
The probate process typically begins once a family reports the death of a relative to the court. Probate can be lengthy but is often more streamlined if the deceased has a will.
Probate With a Will
The court’s involvement is typically less extensive when there is a will. Their main goal is to validate the will and let the appointed executor handle the estate.
What to Expect
- The will is filed in probate court, and a death notice is published.
- The court validates the will and grants the named executor authority to act.
- The executor notifies any interested parties, such as close family members, heirs, and creditors.
- The executor takes a detailed inventory of the estate, including all property, assets, and debts, and reports it to the court.
- The executor pays any debts, claims, or taxes owed with estate assets.
- After paying debts and taxes, the executor distributes the remaining assets per will instructions.
- The executor files a petition for the final distribution of the estate. Once the court approves it, the probate process is complete.
If you don’t have a will, you need one. Learn how a will works, how to create one, and what to include.
Probate Without a Will
Dying without a will is referred to as dying intestate. In these cases, the court is involved from beginning to end, which means:
- Assets are frozen until the court digs through them one by one.
- Even if you knew what the wishes of your loved one were, without a will, there’s no legal documentation to prove it.
- Because the court is heavily involved, costs will be much higher, and the process will take longer.
What to Expect
- A petition is filed in probate court to open an intestate estate and appoint an administrator.
- The court appoints an administrator, usually a close family member or friend, to execute probate tasks.
- The administrator takes a detailed inventory of the estate, including all property, assets, and debts, and reports it to the court.
- The administrator pays any debts, claims, or taxes owed with estate assets.
- After paying debts and taxes, the administrator distributes the remaining assets to the beneficiaries determined by state intestacy laws, decided by a probate judge.
- The administrator files a final accounting with the court and requests the estate be closed.
See what you’d pay for life insurance
How to Avoid Probate Court
The probate process can take anywhere from a few months to several years. The longer it takes and the more complex the estate, the higher the costs.
Additionally, records that go through probate become publicly available. Given these factors, many people aim to avoid probate or decrease assets subject to probate.
There are many legally-approved methods to help you avoid probate court.
Establish a Living Trust
Assets held in a trust avoid probate. Once you create a trust, you can transfer property to it.
A living trust, also known as a revocable trust, allows you to maintain control over the property during your lifetime:
- You can change the terms
- Move property in and out as needed
- Dissolve it
As owner and creator of the trust, you name a successor trustee to manage the trust upon your death. When you die, this person distributes the trust’s assets to the beneficiaries as outlined in the trust documents, skipping probate altogether.
A trust is one aspect of estate planning. Learn about the importance of having an estate plan.
Take Advantage of Life Insurance
When you buy life insurance, you designate beneficiaries to receive the death benefit. Upon your death, proceeds are paid directly to them. These proceeds are kept out of your estate, avoiding probate.
If you fail to name specific beneficiaries or they die first and you haven’t named contingent beneficiaries, proceeds go to your estate. In this situation, the proceeds do go through probate.
Be sure to designate your beneficiaries properly and review them regularly.
Set Up Joint Ownership
Jointly-owned property simplifies matters. If one owner passes away, ownership typically transfers to the survivor, bypassing probate.
Examples of property that can be jointly owned include:
- Real estate
- Bank accounts
- Investment accounts
- Business interests
It’s important to consult with a legal or financial advisor to understand the implications of changing joint ownership, as it can have significant legal and tax consequences.
Designate Asset Beneficiaries
Assets with specific beneficiary designations, such as savings, investment, or retirement accounts, can be transferred directly to the beneficiaries upon the owner’s death.
This transfer is often as simple as the named beneficiary presenting a death certificate and proof of identification.
Gifting assets while you’re alive reduces the size of your estate, which could potentially avoid or minimize estate taxes upon your death. Once gifted, these assets are no longer subject to probate.
It’s important to note that gifting valuable assets could incur taxes.
Fortunately, exclusions are quite generous. In 2023, there is a $17,000 per recipient annual exclusion and a $12.92 million lifetime exclusion. You can gift up to these amounts without triggering a gift tax.
If you gift over $17,000 to a single individual within one year, you must report it. You will only be liable for taxes if you exceed your lifetime exclusion.
Jane is looking to reduce her estate and gift some of her assets.
- She gives $15,000 to her daughter to go toward her granddaughter’s tuition.
- She gives her son a car valued at $20,000.
- She gives her sister a painting appraised at $25,000.
- She donates $30,000 to her favorite charity.
For the car given to her son, Jane would need to report $3,000 on her gift tax return as this amount exceeds the $17,000 annual exclusion limit ($20,000 – $17,000).
For the painting gifted to her sister, Jane would report $8,000, the amount by which the painting’s value exceeds the annual exclusion limit ($25,000 – $17,000). However, she wouldn’t owe any gift taxes on these amounts as long as she hasn’t exceeded the lifetime exclusion.
Donations to charities are generally tax-exempt and don’t need to be reported.
By gifting these assets, Jane reduces the value of her estate by $90,000 and ensures these assets won’t have to go through the probate process.
Estate Probate FAQs
Everyone has an estate. Some are complicated to settle. Let’s review additional common questions about the probate process and estate law.
How Long Can You Keep an Estate Open After Death?
Many steps happen during estate settlement, including:
- Filing a will
- Initiating probate
- Claiming debts
- Filing tax returns
- Distributing assets
Understandably, it can take quite some time to wrap up an estate, and extensions are sometimes necessary.
While deadlines vary from state to state, the average time you can keep an estate open is two years.
What Happens to Personal Belongings After a Death Without a Will?
If you die without a will, personal belongings are subject to your state’s intestacy laws.
A court-appointed administrator gathers, appraises, and records the deceased’s possessions, then distributes them to heirs determined by the court.
This usually starts with the surviving spouse and children, followed by more distant relatives if no immediate family members exist.
How Long Do You Have to Transfer Property After Death?
The timeline to transfer property after death can vary based on several factors, including:
- Whether the deceased left a will
- Type of property
- State’s specific probate laws
Generally, the executor first uses estate assets to pay all debts and taxes, then the remaining assets are distributed to beneficiaries. For any assets that pass through probate, the process takes 6-24 months on average.
Is Probate Needed If There Is a Will?
Yes. A will is validated in probate and then used as guidance to determine how assets are distributed.
How Long Do You Have to File Probate After Death?
The deadline to file the petition for probate ranges from one to six months, depending on the state.
Filing as soon as possible is recommended since delays can complicate matters, especially if the deceased has many debts or a complex estate.
Take Steps to Protect Your Estate Today
It’s never too early to plan for the future. Thinking through your estate now can help reduce the stress your loved ones feel later.
The first step in protecting your estate is creating a will. There are many end-of-life documents you should know about, a will being the most basic.
Consider designating beneficiaries for your assets and exploring opportunities to gift or transfer assets during your lifetime. If you don’t have life insurance, learn what makes it beneficial for estate planning and how it financially protects your loved ones.
Compare term life insurance quotes and apply for coverage today.
Remember to review and update your estate plan regularly as tax laws and personal circumstances can change. Consulting with an experienced estate planning attorney or financial advisor can provide personalized guidance.