Avoiding Probate

You may have heard or read that you ought to avoid probate—and that if you don't take steps to do so, your survivors will surely waste a lot of time and money after your death. This section will help you understand what probate is and why you may want to steer your estate away from it.

What Is Probate?

Probate is the legal process that includes filing a deceased person's will with a court, locating and gathering assets, paying debts and taxes and eventually distributing what's left as the will directs. Most estates that pass by wills must go through probate to take care of these tasks.

However, there are many non-will ways to transfer property, and many of those do not require probate. Also, estates that qualify as "small" under the terms of a state's law can avoid probate even if a will is used. If there is no will and no probate avoidance devices are used, property is distributed according to state law—and it still must go through probate.

Fortunately, there are many non-probate devices you can use to pass your property after your death, including revocable living trusts, joint tenancy, transfer-on-death deeds, pay-on-death beneficiary designations and others. Property transferred by any of these methods can be

given directly to the people slated to get it at your death—no court proceedings required.

Why Avoid Probate?

Probate has many drawbacks and few advantages. It's usually costly, involving fees for attorneys, appraisers, accountants and the probate court. The cost of probate varies widely from state to state, but fees can eat up about 5% of your estate, leaving that much less to go to the people you want to get it. If the estate is complicated, the fees can be even larger.

At least as bad as the expense of probate is the delay it causes. In many states, probate can take a year or two, during which time beneficiaries generally get nothing unless the judge allows the immediate family a small "family allowance."

If you own real estate in more than one state, it's usually necessary to have a separate probate proceeding in each state. That means the surviving relatives must probably find and hire a lawyer in each state and pay for multiple probate proceedings.

From the family's point of view, probate's headaches are rarely justified. If the estate contains common kinds of property—a house, stocks, bank accounts, a small business, cars—and no relatives or creditors are fighting about it, the property merely needs to be handed over to the new owners. In the vast majority of cases, the probate process entails nothing more than tedious paperwork, and the attorney is nothing more than a very highly paid clerk.

Keep in mind that probate isn't always bad. In some circumstances, the benefits of probate can outweigh the burdens and costs. For example, probate court may be the best place to deal with an estate with substantial debt or numerous creditors. Similarly, if there is insurmountable fighting among beneficiaries, the probate court can serve as a neutral party to make final distributions. Also, if there was no one in the deceased person's life to do the work as executor or trustee, then the probate court will be there to do the job.