What Is Probate and When Is It Required?

Key Takeaways

Probate is defined as the legal process often required to settle the estate of a person who has died. The probate process typically depends on the complexity of the estate. A large, extensive estate may require detailed planning to avoid probate perils. A small estate might not pass through probate at all.

Every state has its own probate laws, so the difficulty of the process also depends on where you live. As you consider your estate plan, here are some things that may help you understand how probate works.

What Is the Purpose of Probate?

Probate is the process of a court validating a will and distributing assets (and paying any debts and taxes) after a person passes away.

Some families try to avoid the probate process because it can be slow and costly, and all records are made publicly available. They may also fear that a court’s decisions about how to divide assets may not match the intentions of their deceased loved one.

When Is Probate Required?

While probate is usually necessary, it isn’t always complicated and doesn’t always mean a judge is making financial decisions. The details all depend on the estate plan of the deceased person, as well as:

• The type and value of the property

• The ownership of the property

• Any named beneficiaries

• Your state

If there is a will in place, a court validates the will and appoints a personal representative (or executor) to handle and distribute the assets of the deceased person (also called the decedent) to beneficiaries and heirs.

Before distributing the assets, the representative must pay the decedent’s debts, bills and taxes. Discovering and managing all the debts owed by the decedent is one of the main reasons the probate process can take time.

For smaller estates, some states provide for a simpler probate process—or skip the process altogether. What is considered to be a small estate varies by state, so be sure to check the laws.

The Probate Process

Typically, the executor of an estate starts by filing a petition with the local court. A probate lawyer may be needed to help guide the family or executor through the process.

The executor documents all assets and debts of the deceased person and presents them to the court. Under the guidance of the court, the executor will pay the debts as necessary and distribute any remaining assets according to the will. If there is no will, the court will determine how to distribute any remaining assets.

When the process is complete, the executor must present all records and receipts to the court and ask the court to close the estate.

Types of Assets in Probate

Many types of assets don’t require probate. An estate may include “probated” and “non-probated” assets.

Non-probated assets generally include any bank, life insurance, retirement and brokerage accounts that list a beneficiary or a Payable on Death or Transfer on Death designation.

Property held in joint tenancy with right of survivorship, such as real estate and financial accounts, along with property held in a trust, are all non-probated assets.

Probated assets are held solely in the decedent’s name without a designated beneficiary. These may include bank and brokerage accounts, personal property such as vehicles, real estate or a life insurance policy with the decedent or estate listed as beneficiary.

Duration of the Probate Process

The probate process can take from a few weeks or months to several years. The length of time depends on several factors, including state laws and the estate’s complexity. Other factors can include the existence of a properly executed will, debts to be paid, estate taxes owed and whether heirs agree on decisions.

Often, state tax laws and various filing requirements cause the biggest delays. For simple estates, many states offer expedited processes that last just a few months.

Costs Associated With Probate

Costs vary depending on the complexity and value of the estate as well as standard fees set by state law. Fees may include appraisal costs, court filing fees, accounting fees and executor fees. The average probate process could cost 3%-7% of the estate’s value, according to estimates.¹

There are also fees if you use an attorney. Some attorneys charge hourly rates, while others charge a flat fee or a fee based on a percentage of the estate’s value. If someone contests the will, that can result in additional legal fees. The hassle factor and cost of a complicated process are the primary reasons probate gets a bad name. But many estates are settled with minimal fuss.

Avoiding Probate: Is It Necessary?

It may be a good idea to try to avoid probate if you don’t want your property to be tied up by the court, for instance, or if you think your heirs may disagree about how to distribute the assets. Designating beneficiaries on non-probated accounts is the easiest way to keep assets out of the probate process.

For other assets, you can avoid probate by gifting some of your assets to heirs while you are still living or adding a spouse or child as a joint owner of real estate, bank accounts, investment accounts and other assets. Any asset that has joint tenancy will automatically go to the joint tenant upon the death of an owner.

The only other way to avoid probate is to hold assets in a trust. With a living trust, the assets are already “distributed” to the trust, so probate isn’t necessary. It’s important to understand the difference between a will and a trust.

To learn more about probate or for help drawing up your own estate plans, an estate planning attorney can discuss your specific situation and potential needs.