What is probate? Understanding the probate process

Probate is one of the most common terms when it comes to estate planning and estate settlement – but it’s probably also the most misunderstood.

It’s important to understand the probate process and what it entails to avoid potential delays and unnecessary costs when settling the estates of loved ones.

What is probate?

Jonathan Longfield, trust and probate specialist with U.S. Bank Private Wealth Management, describes probate as “the court-supervised settling and administration of a decedent’s final affairs.”

When someone dies, if probate administration is necessary or desired, the probate court confirms the validity of the decedent’s last will, appoints an executor to manage the estate and generally reviews the administration. Administration of an Estate includes identifying all probate assets, valuing those assets as of the decedent’s date of death, accounting for all transactions during the pendency of the administration, and distribution of the probate assets in accordance with the instructions in the decedent’s will.

“In short, the purpose of the probate process is to confirm and carry out the decedent’s final wishes as described in their last will and testament,” says Longfield.

When is probate required?

“Generally speaking, probate is required when assets don’t automatically transfer to someone by other legal means,” Longfield says. “This includes assets that are individually titled or don’t have a beneficiary designation.”

The following assets typically could be subject to probate:

• Cash, deposit and financial accounts
• Tangible personal property, such as vehicles, jewelry, antiques and collectibles
• Real estate, including the deceased’s primary residence
• Assets not titled to a trust
• Assets for which no beneficiary is named
• Assets held as tenants in common, rather than as joint tenants or tenants by the entirety

Certain assets, such as life insurance, retirement accounts, including pensions, IRAs and 401(k)s, usually are not subject to probate, as they generally have beneficiary designations.

What is the probate process?

It’s important to note that the steps in the probate process differ substantially from one state to the next, and not all assets are required to go through the steps in the probate process.  Probate may also not be necessary at all for some individuals after they pass. However, when probate is necessary, certain procedures are generally followed.

After someone dies, the probate process is typically initiated by the executor of their estate, usually a trusted family member or friend. The court will appoint an executor if one isn’t named in the will. The executor files the decedent’s last will and testament with the court. This must be done within a certain timeframe, which differs depending on the state.

The executor will work with the probate court to inventory the decedent’s probate assets and determine their value, as well as resolve and pay any outstanding debts and taxes.

The probate court will confirm that the executor has discharged their duties appropriately and provide a final ruling on the division and distribution of assets to beneficiaries. The executor will make final distribution of the assets according to the terms of the deceased’s last will and testament.

However, there’s a fair amount of variance from state to state, Longfield notes. “Some states have sub-steps associated with each step in the probate process, while other states have much more abbreviated steps,” he says.

Also, some states offer alternatives to probate which may be faster and less expensive for estates that are below a certain value, such as $50,000 or $75,000. In these cases, beneficiaries may claim assets using alternative legal actions, including a small estate affidavit.

How long does probate take?

Depending on the circumstances, the probate process can be lengthy or relatively quick. The larger and more complex the estate, the longer the steps of probate will take and the more expensive it will be.

Probating an estate that doesn’t have a last will and testament (referred to as intestacy), or particularly one in which the will is contested, generally will take longer and cost more.

“With a relatively small and simple uncontested estate, the probate process can be completed in as little as four to six months in some states,” Longfield says. “However, there’s practically no upper limit on how long the steps of probate can take, as we’ve seen from the estates of some celebrities who died intestate and which involved litigation.”

Most courts expect the probate process to be completed within roughly 18 months, he adds.

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How much does probate cost?

The cost of probate depends on the estate’s size and complexity, as well as the state’s specific probate laws and whether the decedent left behind a will. However, total probate costs generally range from 2% to 5% of the total value of the estate’s assets.

Typical probate costs include:

• Court fees
• Account fees
• Appraisal and valuation fees
• Attorney fees
• Executor fees

How to avoid probate

If you want to avoid probate, the first step would be to meet with an experienced attorney who can craft an estate plan that fits your situation.  Your attorney may advise you to name primary and contingent beneficiaries on all your financial accounts, including retirement accounts, bank accounts and brokerage accounts, to the extent possible. Be sure to review all your beneficiary designations annually or whenever you experience a life event, such as a birth, a death in the family, a marriage or a divorce.

Another way your attorney may recommend avoiding the steps of probate is by titling assets properly. For example, when a married couple’s assets are jointly owned with right of survivorship, they automatically pass to the surviving spouse without going through the probate process. However, married couples aren’t the only ones who can benefit from right of survivorship. If someone is an in-home caregiver for their mother, for example, the mother could add her adult child as a joint tenant on her house, and the house would automatically pass to the child when the mother dies. (Note that there could be tax implications in this scenario, so be sure to discuss with a financial professional.)

Finally, working with your attorney to set up a living trust, also known as a revocable trust, is another way to avoid probate. A grantor (the trust’s owner) can generally transfer most of their assets into a living trust.  The grantor can change the trust’s provisions at anytime while they’re alive. “Assets held in a revocable living trust will avoid probate,” Longfield notes.

Estate planning and probate

While people generally think of probate as something to be avoided, if possible, Longfield says the probate process can serve a useful estate planning purpose.

“Probate helps ensure that the wishes of the decedent are legally fulfilled when it comes to distributing their assets to family members and causes they care about,” he says.  For some people, the added formality and protections associated with probate could be worth the additional costs and time. 

Be sure to speak with your attorney and tax advisor about how probate might apply to your specific situation.

Learn more about trust and estate services from U.S. Bank.