Understanding Probate

Probate is a legal process to determine who should receive your property at the time of your death, who should handle our business affairs, and who should care for any minor children and their assets.  Assets owned and registered in your name that do not already have a beneficiary – including cash, investments, personal property, and real estate – make up what is called the "probate estate."  These assets are controlled by the will and "pass through" the probate process in order for ownership to be transferred.  All other assets "pass outside" the probate process.

Not all property you own is subject to probate.  Property held in joint tenancy with right of survivorship; property held in a trust; life insurance or retirement funds payable to a named beneficiary; payable-on-death checking and savings accounts (POD), and registrations on securities and securities accounts are all examples of non-probate property.

Probate property is all that you own that does not, by the way it is titled, have survivorship rights. Examples of probate property are your share of property owned as tenants in common, your share of household goods, and property owned only by you.  Probate property is distributed at death according to the directions in your will or under the laws of the State in which you reside if you do not have a will.

Why you want to avoid Probate

Most of us have heard that it is wise to avoid probate wherever possible.  There are two primary reasons for this commonly held belief:

• A typical probate lasts about a year, with six months generally being a minimum time if everything proceeds as scheduled.  During this time, property is effectively tied up.
• Attorney fees, executor commissions and court costs can take up to 5% of an estate’s value, making the process very expensive to your heirs.

This would not be so bad if probate served a useful purpose, but usually it does not. People who defend the probate system -- mostly lawyers -- assert that probate prevents fraud in transferring a deceased person's property and that it protects inheritors by promptly resolving creditors' claims. But in truth, most property is transferred within a close circle of family and friends, and few estates face large creditors' claims.

So it becomes clear that one important goal of an estate plan is to reduce or eliminate probate as much as possible.