What Is Probate?
Probate is the legal process that wraps up a person’s legal and financial affairs after their death. During the probate process a person’s property is identified, cataloged, and appraised. In addition, probate makes certain any outstanding debts and taxes are paid. It can be a complex process, filled with very specific legal requirements.Tip: Both the lawyer and the executor are entitled to fees from an estate. In addition, there will be court costs, appraiser’s fees, and may be other expenses. Nolo, 2013
For example, if someone dies without a valid will, the probate court sees that the deceased person’s assets are distributed according to the laws of the state.
If someone dies with a valid will, the probate court is charged with ensuring the deceased person’s assets are distributed according to their wishes.
Probate Process
Probate can take a long time — anywhere from a few months to more than a year. If there is a will, and one or more of the heirs chooses to contest the document, the process can take a lot longer.1 Probate can be expensive. Even though probate costs are capped in some states — they may reach between 3% and 7% of the estate’s value. That’s calculated on the gross value of the estate — before taxes, debts, and other expenses are paid. And if probate process is challenged, the legal costs can rise.2 Finally, probate takes place in a public court. That makes everything a matter of public record; there is no privacy. Anyone who wants to can find out exactly what was left behind — and how much each of a deceased person’s heirs received — can review the court records for the deceased person’s estate.Those who have concerns for their heirs’ privacy may want to take steps to manage the probate process. Every estate passes through probate following the person’s death. Probate can be a public process that discusses all your assets, or it can be managed to include as little information as possible. When preparing your estate documents, consider how you want the courts to handle your personal finances after your passing.Fast Fact: Sounds like Latin. The word “probate” comes from the Latin verb “probatum” which means “to prove.” Thus, when a will is probated, its validity is “proved” before a court, which then orders the terms of the will to be followed. Merriam-Webster, 2013
Property That Avoids Probate
Some assets can be structured so they may not have to go through probate. Here’s a partial list:- Property held in a trust
- Jointly held property (but not common property)
- Death benefits from insurance policies (unless payable to the estate)
- Property given away before you die
- Assets in a pay-on-death account
- Retirement accounts with a named beneficiary
1,2. Nolo.com, 2013
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2013 FMG Suite.
