In late 2020, my mother was diagnosed with the big “C”. A ripple of emotions of surprise, sadness, confusion, anger rushed over me. After the initial shock, my mother was calm enough to know that she needed to get more organized. She owned multiple properties, various investment accounts, insurance, and personal property. The unpredictable health scare moved her to align her assets to avoid probate. It’s not a fun topic, but a very important conversation to have with your family.
What is probate?
Probate is the legal process of administering a person’s estate after their death. This can include gathering and valuing assets, paying debts and taxes, and distributing the remaining assets to the beneficiaries according to the will (or state law if there is no will).
Probate can be a complex and time-consuming process, so it’s important to understand the basics. Here are five things you need to know about probate:
What is a probate asset?
A probate asset is any asset that is owned by the deceased person in their individual name and does not have a designated beneficiary. This can include real estate, bank accounts, investment accounts, and personal property.
What is a non-probate asset?
A non-probate asset is any asset that passes to someone else outside of the probate process. This can include assets with designated beneficiaries, such as life insurance policies, retirement accounts, investment accounts with a Transfer/Payable on Death of T/POD designation, and joint tenancy property.
Who is responsible for probate?
The person responsible for probate is called the personal representative. This person is appointed by the court to manage the estate and carry out the terms of the will. If there is no will, the court will appoint an administrator to distribute the estate according to state law.
What are the steps involved in probate? (may vary depending upon state laws)
- The personal representative files a petition with the court to open probate.
- The personal representative publishes a notice of the decedent’s death and gives notice to all known heirs and creditors.
- The personal representative gathers and values the assets of the estate.
- The personal representative pays debts and taxes.
- The personal representative distributes the remaining assets to the beneficiaries according to the will (or state law if there is no will).
How long does probate take? The length of the probate process is multivariable: the complexity of the estate, the number of heirs and creditors, and the workload of the probate court. In general, probate can take several months or even years to complete.
Tips for avoiding probate
Create a will. A will is a legal document that states your wishes for how your assets should be distributed after your death. Having a will can help to streamline the probate process and make it less expensive for your heirs.
Consider titling assets joint tenancy or tenancy by the entirety. When you hold property in joint tenancy or tenancy by the entirety you share ownership and control while you are alive, and after death the surviving owner automatically inherits the property of the other owner. This means that the property does not have to go through probate.
Consider titling assets with a POD or TOD designation. If you add a Payable on Death or Transfer on Death instruction to bank, investment accounts, or property, you have sole control of the assets while you are alive, and the named party takes ownership and control of these assets upon death.
Create a living trust. A living trust is a legal document that transfers ownership of your assets to a trustee. The trustee then manages the assets and distributes them to your beneficiaries according to your instructions. Living trusts can be complex, but they can be a very effective way to avoid probate.
If you have any questions about probate, it’s important to speak with an estate planning attorney. They can help you to understand the probate process and develop a plan to minimize the impact on your heirs.
Dave Valdez, CWS®, CLU®, ChFC®
Director of Enterprise Growth
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