Estate planning expert Liza Hanks gives you the facts about probate: what it is, what it's for, and why courts don't always require it.
What Is Probate?
Probate is how a court settles the estate of someone who has died. The judge appoints someone, called an executor or personal representative, to handle the following tasks:
- gather and value the estate's assets
- pay bills and any taxes due, and
- distribute property to heirs or beneficiaries.
If you make a will before you die, you can nominate your executor or personal representative. The judge will almost always follow your suggestion when making the official appointment. If you die without a will, however, the court will decide who your executor will be -- usually your surviving spouse, one of your adult children, or another close relative if you are single without grown kids at the time of your death.
The Purpose of Probate
The purpose of probate is to prevent fraud after someone's death. (Imagine everyone looting the castle after the Lord dies.) The probate process freezes the estate until a judge determines that the will is valid and the executor has:
- notified all relevant people
- identified and appraised all the property in the estate, and
- paid all debts and taxes out of the estate's assets.
After all of that's done, the court issues an order distributing the property and closes the estate.
Many Estates Can Avoid Probate
Not all estates must go through probate. First, if the value of an estate falls below a certain threshold, it is considered a "small estate" and it doesn't require court supervision to be settled.
Second, not all assets are subject to probate. Some kinds of assets, like assets held in joint tenancy, transfer automatically when an owner dies. And some kinds of property that allow you to name a beneficiary go directly to the person you name. Examples include retirement accounts, life insurance, and payable on death accounts. A good estate planning adviser can help you take advantage of methods like these to pass your property as quickly and inexpensively as possible.
Finally, if you make a living trust to hold your largest assets, that property won't go through probate unless the property you pass outside of the trust adds up to more than your state’s small estate limit.