What is Probate?
Probate is legal process of transferring property from a decedent to that person’s heirs. Sounds simple enough. Unfortunately, probate is not simple. Instead, probate is court administered process of appointing a person (the administrator) to gather, list and account for a deceased person’s property. The administrator will be required to report to all of the heirs of the estate the property held in the estate and its value. The administrator may, with the court’s permission, sell the assets, pay debts and distribute property (including cash) to the heirs.
Since probate is a court approved process, the administrator must seek court approval for most actions he or she wants to take. Probate typically takes 18 months to close and is often quite expensive. If you have small children and have not planned correctly, the court will decide where and with whom your children will live. Sometimes probate is useful. However, in most cases, probate can be avoided with proper planning. By taking the time to plan appropriately, you will save your estate thousands of dollars and months of delay. You will take control of your family’s future and the legacy you have built.
Does a Will avoid probate?
No. A Last Will and Testament directs the executor of the will to distribute the decedent’s property to persons chosen by the creator of the will (the “Testator”). If the deceased person only leaves a will and his or her real and personal property exceeds $150,000 in gross value, the executor of the will must petition the court for probate. Real property, even if not sold, cannot be transferred without court approval.
How can I avoid probate?
Planning ahead of time is important to avoid probate. There are several options in avoiding probate:
- Leave less than $150,000 in assets in your estate
- Create a Living Trust (Revocable or Irrevocable) and transfer ownership of your property to the trust
- Transfer partial ownership of your property in a Joint Tenancy (this method may cause a gift tax issue, so please consult with your attorney or CPA beforehand)
- Transfer ownership of your property to your heirs (this may result in a gift tax issue, so please consult your attorney before choosing this probate avoidance tool); or
- Appoint a beneficiary for your life insurance and retirement accounts.