What is probate, anyway?

Estate Planning, Investing
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What is probate?

Probate law governs who gets what after you die. Probate is the legal process of administering a deceased person’s estate, resolving claims and distributing property under the will. A probate court decides the validity of the will, and grants approval to the executor (as named in the will). The probate court also officially appoints the executor named as having the legal power to dispose of the assets as specified in the will.

Note that probate is just the act of administering the distribution. It has no relationship to your tax liability.

  • If you die intestate (without a will), a portion of the estate passes to the surviving spouse without a probate (this is not true for same-sex couples)
  • Each state has a different minimum threshold for when probate comes into play

The importance of having your ducks in a row

In doing your financial and estate planning, it is important to conduct a thorough review of your assets and what will happen to them if you should pass away.


Review your probate and non-probate assets

Probate Non-Probate
Individual Assets Assets jointly owned with right of survivorship
Tenant-in-common assets Assets you own jointly with your spouse as tenants by the entirety
Beneficiary assets with pre-deceased beneficiaries or no-beneficiaries Assets owned by your Revocable Living Trust
Assets owned by you and payable to a designated beneficiary

  • Payable on death (“POD”) accounts, transfer on death (“TOD”) accounts, in trust for (“ITF”) accounts and Totten trusts
  • Life insurance policies
  • Retirement accounts, including IRAs, 401(k)s and annuities
  • Health or medical savings accounts
Assets in which you retain a life estate and the remainder passes to a non-charitable beneficiary other than yourself

 

Cautionary tale: Are your beneficiary designations up to date?

Jennifer Tobits’ wife of four years, Sarah Ellyn Farley passed away from cancer in September 2010. After her death, Farley’s parents who had never accepted their daughter’s marriage to Tobits, filed a petition in probate court to take over administration of her estate. They also filed a claim to Farley’s pension plan benefits. Farley had failed to designate a beneficiary, and though normally if no beneficiary is named, the benefits pass to the surviving spouse, the parents are claiming that they should receive the benefits. They are arguing that the DOMA definition of spouse (as someone of the opposite sex) applies to the pension plan since the pension plan is an ERISA plan (federally regulated pension plan) .

This case is still pending.

Legal documents image via Shutterstock