The Costs of Probate and the Benefit of Estate Planning

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probate

What Is Probate?

When you die, your estate goes through a process that manages, settles, and distributes your property according to the terms of your will or according to the intestacy laws of your state. This process is governed by state law and is called probate. Probate proceedings fall under the jurisdiction of the probate court of the state in which you are domiciled at the time of your death. This court oversees probate of your personal property and any real estate that is located in that state. If you own property located in a state other than the state in which you are domiciled at the time of your death, a separate “ancillary” probate proceeding may need to be initiated in the other state.

Items that are subject to probate are known as probate assets. Probate assets generally consist of any property that you own individually at the time of your death that passes to your beneficiaries according to the terms of your will or according to the intestacy laws of your state. Nonprobate assets include all property that passes outside of your will. Examples of nonprobate assets include property that is owned jointly with right of survivorship (e.g., a jointly held bank account) and property that is owned as tenants-by-the-entirety (i.e., real property owned jointly by a husband and wife). Another example is property that passes to designated beneficiaries by operation of law, such as proceeds of life insurance and retirement benefits.

Why Avoid Probate?

Most wills have to be probated. The rules vary from state to state, but Florida allows smaller estates (less than $75,000) to qualify for an expedited process known as Summary Administration.

Nonetheless, probate can be slow. Depending on where your executor probates your estate and the size of your probate estate, the probate process can take as little as three months or as long as three years. Three years can be a long time to wait for needed income. It can take even longer if the estate is a complicated one or if any of the heirs are contesting the will.

Probate can be costly. Probate costs usually include court costs (filing fees, etc.), publication costs for legal notices, attorney’s fees, executor’s fees, bond premiums and appraisal fees. Court costs and attorney’s fees can vary from state to state. Typically, the larger the estate, the greater the probate costs. However, if a smaller estate has complex issues associated with its administration or with distribution of its assets (e.g., if the decedent owned property in several states), probate can be quite costly.
Probate is a public process. Wills and any other documents submitted for probate become part of the public record, something to consider if you or your family members have privacy concerns.

How to Avoid Probate?

An estate plan can be designed to limit the assets that pass through probate or to avoid probate altogether. The major ways property is passed outside of probate are

1. Owning property jointly with rights of survivorship. A married husband and wife can own property as Tenants by the Entirety, which comes with rights of survivorship. When one spouse dies, the entire property passes to the other spouse outside of probate. While Tenants by the Entirety requires marriage, siblings or even friends, can also own property with rights of survivorship via joint tenancy.

2. Another way you can avoid probate is by ensuring that beneficiary designation forms are completed for those types of assets that allow them, such as IRAs, retirement plans and life insurance. Even bank accounts have pay on death beneficiary forms which also allow you to avoid probate.

3. Finally, a very popular way off avoiding probate is to put property in a trust. With the help of a knowledgeable estate planning attorney, you can create a revocable trust to transfer property and assets too. Thus, when you pass away, all of the assets within the trust will pass according to the terms of the trust, and should avoid the probate process altogether.

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