In simple terms, probate is the legal process for distributing your property after you die.
However, “simple” may not be the first word that comes to mind when you think of probate. While probate isn’t always complex, it is important to understand the process, particularly if you wish to spare your heirs from it.
What is probate?
Your estate executor or the attorney representing your estate typically initiates probate. During this process, a probate court validates your will and then authorizes your executor to distribute your estate to your beneficiaries as you instructed, as well as pay any taxes your estate may owe.
If you have no will, a further administrative proceeding must be held to determine how your estate will be divided. In this case, the court will name an administrator for your estate, who then follows the probate judge’s instructions on how to distribute your property.
Is probate the same in every state?
Probate laws differ across the country, so it’s important to be familiar with your state’s mandates so your final wishes can be administered efficiently.
For example, state laws vary on what happens if you die without a will. If you are a resident of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin, your estate will be settled using community property laws. (Alaska allows its residents to opt in to community property laws.)
Community property laws hold that both spouses equally own all property obtained during their marriage. In death, if you are married and have no children, the court will award your assets to your spouse. In other situations, probate courts will determine how your estate will be distributed using state inheritance rules.
In most cases, the estate distribution hierarchy begins with your spouse. If you’re not married, your assets pass to other family members in a specific order, typically starting with your surviving children and then to other relatives based on their closeness to you.
Why should you avoid probate?
Although probate is often straightforward, many people want to avoid it. The reasons can vary, but there are some common complaints about the process:
- It can be slow. In some cases, it can take years for a probate court to finalize an estate, especially if it’s complicated or involves a contested will.
- It can be costly. Costs vary from state to state, but probate generally entails executor fees, attorney costs and other administrative expenses, such as appraiser’s fees. In some cases, these charges can accumulate quickly. The expenses are exacerbated if the process drags on for a while.
- It is public. Since it is a state legal proceeding, what goes on in probate court does not stay there. All the material in the probate process goes into the public record.
How can you avoid probate?
Regardless of why you want to avoid probate, there are steps you can take to do just that.
- Have a small estate. Most states set an exemption level for probate, offering at least an expedited process for what is deemed a small estate. In some cases, “small” actually can be quite large. Check your state’s probate estate limits.
- Give away your assets while you’re alive. You might be able to get your estate to a simplified or exempt probate position by reducing its value while you are still here. Instead of leaving your assets to family and friends after you die, give them the items before then. Not only can this reduce the amount of your estate that goes through probate, it also might help trim or even eliminate future federal and state estate taxes.
- Establish a living trust. Trusts are appealing when it comes to avoiding probate because property held in trust is not part of your estate upon your death. The reason? A trustee, not you, controls the trust property, and is obligated to distribute it under the terms of the trust agreement.
- Make accounts payable on death. Bank and other accounts that are payable on death go directly to your designated beneficiary without going through probate. Some states also allow such transfers of real estate.
- Own property jointly. Making your spouse or someone else a joint owner facilitates the transfer of the asset without the need for probate. Some ways to hold such assets include joint tenancy with right of survivorship, tenancy by the entirety and community property with right of survivorship.
Looking for more advice on these topics? See NerdWallet’s estate planning basics.
Kay Bell is a contributing writer at NerdWallet, a personal finance website.