What You Need to Know About Probate

If you’re thinking about having your estate plan done, one term you will hear over and over again when you talk to professionals about it is “probate”.  What is probate?

Your estate must go through the probate process if you have certain types of assets. Other assets are not required to go through the probate process at all.  Probate is no place for novices.  You need expert advice to make sure that your estate is planned in a way that avoids a lengthy and costly probate process if at all possible.

Here is a “cheat sheet” to give you clearer picture of how your assets need to be handled and give you a better idea of the questions you need to ask when talking to an estate planning attorney.

If you own property in your own name when you die, a very specific legal process is required to legally transfer the title of that property to the person or persons you name as your beneficiaries or heirs after your death.

Think of it as being similar to the process for buying a home.  If very specific steps aren’t taken, you don’t legally own the property.  The same goes for your assets upon your death.  However, there are certain types of property that don’t have to go through the probate process to transfer title. They are:

• Real property (such as land and buildings) and certain personal property (such as bank accounts or vehicles) owned as joint tenants with right of survivorship passes to the surviving co-owners legally without going through probate.
• Benefits payable to named beneficiaries, such as life insurance or annuities, as well as funds from IRAs, Keoghs, and 401(k) accounts transfer automatically to the named beneficiaries.  Bank accounts that are set up as payable-on-death accounts (POD for short) (also called an “in trust for” account) with a named beneficiary also pass to that beneficiary.  For any of these, however, beware of having minors as beneficiaries as this will pull the asset transfer into the court process.

• Assets placed into a Trust before your death belong to the Trust, not you, when you die, and are not included in the estate that has to go through probate. The most common form of Trust used to remove property from probate is a revocable Living Trust. A “revocable” trust can be cancelled as long as you are alive and competent to make decisions. The Trust survives you.  After your death, the Trustee you have named will distribute the assets of the Trust to the named beneficiaries without going through probate or being supervised by a court (and usually without making the Trust provisions public).

  Now, exactly what property has to go through the probate process?

• Any other property you own in your name at the time of your death or that is payable to your estate. For example, if you own a house, car, RV, or bank account in your own name (rather than in a trust or jointly with someone) at the time of your death, those items of property will have to be included in the probate estate and go through the probate procedure before they can be legally transferred to the beneficiaries.

• If your estate is named as the Beneficiary of an insurance policy, the proceeds of the policy have to be included in the probate estate. If you are still working and owed salary and benefits from your employer at the time of your death, those proceeds will be part of your probate estate, assuming they are large enough amounts to meet the minimum dollar amount required by your state.

Of course, there are exceptions to these rules controlled by state laws.  Most states allow a certain amount of property to pass to certain beneficiaries without going through the probate process.  For example, community property owned by a married couple may be passed to the surviving spouse through a Will and not be included in the probate process.  Always check with an estate planning attorney familiar with the laws of your state to make sure that you’ve met the probate requirements of your state.

If you have an estate plan or are thinking about planning your estate and would like an expert opinion on how to pass as much property as possible to your loved ones without the hassle of probate, call us to schedule your Family Wealth Planning Session today.  We can identify what needs to be done to ensure that you have the right plan in place to save your loved ones from the hassle and expense of a prolonged probate process.