Probate is the court-supervised process of dispersing an individual’s assets after they’ve passed away. The process involves authenticating the will, gathering and valuing all assets of the estate, and distributing the assets appropriately. However, not all assets are required to go through probate. Since probate can often be time-consuming and costly, the fewer assets that go through it, the better it typically is for those inheriting assets. Though the exact probate rules differ from state to state, the process, affected assets, and reasons to avoid probate are fairly similar across the board.
Learn more about the probate process below, and contact Good Life Financial Advisors of Mt. Pleasant, SC today for assistance with your estate planning needs.
The Probate Process
Inheriting assets is not as simple as reading a will and receiving the assets. There are many steps that must occur between the passing of the individual and the inheritor receiving the assets. The process also differs if there is no will or if assets are below a certain level.
Court Hearing
The first step in the probate process is a court hearing, where a judge will confirm that the will is valid. All beneficiaries named in the will must be notified of the court hearing, as well as anyone who would inherit assets if no will had been made.
During the hearing, the judge appoints an executor of the will. The executor is responsible for the disbursement of the assets and oversees the entire probate process. They are typically appointed in the will, but if an executor hasn’t been named, the next of kin will be named as the executor.
The court hearing is where objections can be made against the will. These objections may arise if there’s a claim of a more recent will, or to object to the executor of the will.
Valuation of Assets
The next step in the probate process is the valuation of the deceased’s estate. This requires accounting for every asset in the individual’s estate, and then determining the date of death values for the assets. As the name implies, the date of death value is the value of all assets on the day of which the individual passed away.
Dispersing Assets to Creditors and Inheritors
Once all the assets have been gathered and valued, any outstanding debts to creditors are paid, and then taxes are filed. Only after all of this has occurred can the executor distribute the remainder of the estate to the inheritors specified in the will.
Exceptions to the Process
There are a few exceptions to the steps of the probate process:
- Assets are below a certain level. In some states, if this occurs, a streamlined process that is cheaper and quicker is offered.
- Intestate succession. The process will also look different if the deceased individual did not have a will, which is known as intestate succession. Intestate succession also occurs if the will is deemed invalid. This would occur, for example, if there’s an error in the will. If intestate succession occurs, all assets must go through probate and assets are distributed to heirs based on the inheritance laws of the state.
Affected Assets
There are a few situations in which probate is avoided:
- The taxable estate contains assets the deceased only had interest in. Probate is necessary for the transition of certain assets to beneficiaries, but probate does not apply to all assets of a deceased individual. The deceased taxable estate includes all assets the deceased had an interest in, but probate only applies to assets in their name. For example, if the deceased had joint ownership of an asset, such as a joint account, then that account becomes the property of the other owner.
- The beneficiary was designated outside of the will. If the beneficiary has already been designated in some form outside of the will, probate can be avoided. For example, if investment accounts already have a TOD (Transfer on Death) designation, or if retirement accounts have named beneficiaries, these accounts don’t need to go through probate. Trusts in the beneficiary’s name also do not have to go through probate. Cash accounts without a TOD, real estate, personal property, or accounts where no beneficiaries have been named all go through probate.
Reasons to Avoid Probate
If the inheritors receive the assets either way, why does it matter if they go through probate or not? There are a few reasons you may wish to avoid probate:
- Probate is public record. This means that anyone can find any information about any assets that went through probate. Many find this lack of privacy unappealing.
- Probate is expensive. How much probate will cost depends on the state, the will, and the size of the estate, but it’s usually about 2-5% of the total assets going through probate.
- Probate is time-consuming. It often takes much longer for inheritors to have access to the assets that go through probate as opposed to those that do not. Avoiding probate usually means accessing the assets sooner and avoiding court costs and attorney fees.
Speak to a Good Life Financial Advisor
Estate planning and the probate process can be complex. Our financial advisors at Good Life Financial Advisors can help to walk you through the process. For estate planning assistance or specific questions regarding how your assets or accounts may be affected by probate, contact us today.
Disclosure
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.