Probate is a court proceeding where your will is filed, assets gathered, debts and taxes paid, and property distributed to your beneficiaries. The process is time-consuming and expensive. Although the cost of probate (attorney fees, court filing fees, and often, appraisal fees) varies, depending on your state and the type of property you own, it can amount to up to 5% of your estate. These fees are taken out of your property and reduce the amount received by your beneficiaries. In contrast, if property is transferred outside of probate, you eliminate fees. And beneficiaries get their property as much as nine months to a year sooner than they would if your estate were probated.
If your property is of modest value (less than $100,000), planning to avoid probate probably won’t result in enough savings to be worth the trouble. Even if you own considerable property, if you are reasonably young and in good health it still often makes sense to limit estate planning to writing a simple will. Later, when you’re older or seriously ill, you can engage in more sophisticated planning. After all, estate planning results in no savings until your death and, if done too soon, must be redone.
If you wish to avoid probate, there are several well-established methods of transferring property that do so. These include:
• revocable living trusts, the most comprehensive way for members of an unmarried couple to avoid probate
• U.S. government securities, retirement accounts, and, in most states, stocks and bonds, for which a beneficiary can be named
• joint tenancy, an excellent probate-avoidance device for real estate and personal property you and your partner acquire equally together, assuming you each want your share to pass to the other at your death, and
For details on all of these and other probate-avoidance methods, including options in your state, see How to Avoid Probate in the Wills and Estate Planning section of this site.
Keep in mind that if you establish a living trust, you should also have a will to deal with property acquired shortly before death or not otherwise covered by the trust, and to name a personal guardian for any minor children.