What is Probate?
What is probate is an important question. The probate process determines how much, if anything, heirs and beneficiaries receive from a loved one's estate. Experts claim less than 20-percent of assets are distributed to heirs by the time estates pass through probate court. Therefore, it is critical to understand available options to ensure assets are protected before you die.
This article offers a summary to answer "what is probate?" Although the process is complex, probate is the act of evaluating decedents' estates to ensure the Last Will and Testament is valid and that assets are distributed according to probate law.
A Will is used to express your final wishes in the event of your death. It allows the opportunity to designate beneficiaries who will receive personal belongings, property holdings and financial assets. The Will is also used to designate an estate administrator to handle final affairs and allows provisions for burial preferences.
Executing a last will and testament does not keep assets out of probate. However, it does make the process less complicated. When a person dies intestate (without a Will), probate is used to determine rightful heirs and assets are distributed according to probate laws set forth in the jurisdiction where you reside.
The probate process typically lasts between six and nine months. Much depends on the court's caseload, complexity of the estate and how well family members get along. When heirs feel slighted or have been disinherited they have the right to contest the Will and make claim to assets they believe are rightfully theirs.
Contesting a Will can cause probate to drag on for years and potentially bankrupt the estate. Initially, legal fees are the responsibility of the plaintiff. If the probate judge rules in favor of the plaintiff, the estate must reimburse legal expenses and distribute assets according to court orders.
Several options exist to protect the estate from enduring family strife that can lead to contesting the Will. The most common is to establish a trust. Many types of trusts exist including living trusts, irrevocable and revocable trusts, and irrevocable life insurance trusts. Trusts are generally reserved for estates valued over $100,000 and established by using the services of an estate planner.
Smaller estates can implement estate planning strategies to keep assets out of probate. These include establishing transfer-on-death (TOD) beneficiaries for investment accounts and titled property and payable-on-death (POD) beneficiaries for checking and savings accounts.
TOD and POD beneficiaries are established by filling out a form provided by the financial institution where accounts are held. Assets can be distributed to as many beneficiaries as desired. For example, if you have checking and savings accounts and wish to divide remaining funds equally amongst three beneficiaries, you would include the recipients' names, addresses, social security numbers, and percentage of funds to be given to them.
In order to claim the funds, beneficiaries must provide a death certificate and proper identification. In most jurisdictions, a stamped form provided by the county tax assessor's office is required to show the decedent does not owe any taxes. If so, the taxes must be paid by the estate before distribution can occur.
Few people possess the ability to endure probate alone. When establishing your Will, work with an estate planner or probate attorney who can assist your designated estate administrator and ensure documents are filed in a timely fashion to prevent further delays.