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All About the Probate Process

By: Matt Rose, CFP®, Financial Advisor

When it comes to estate planning, it is important to structure your assets to pass efficiently and effectively to your beneficiaries. To be best prepared to do this, one must understand the probate process. Probate is a legal process that occurs when a person dies that involves the administration of their will and the distribution of their assets to beneficiaries. If someone dies without a will, he or she is said to have died intestate. If someone dies intestate, probate becomes the general administration of the estate of the decedent. 

Probate can be both expensive and time consuming. Some estates will settle in a few months, others may take a year or longer. The more complex the estate, the more time it will take to settle and distribute the assets. The cost of probate will increase as the settlement and distribution times increase.  

It is important to note that not all assets will pass through probate. The following is a helpful side-by-side of asset types that do and do not pass through probate: 

Does Not Go Through ProbateOrdinarily Goes Through Probate
Items placed inside a trustNon-titled property
Transfer on death itemsSole ownership property
Retirement accounts with a named beneficiaryInvestment accounts without a named beneficiary
Jointly titled property with survivor’s rightsPartner-owned investment property

There are several different ways to best shelter your estate against exorbitant probate costs, and here we will highlight two. The first is simple: make sure you have a named beneficiary on all retirement and investment accounts. These assets will pass by “law of contract” and therefore forgo probate if there is a listed beneficiary. A second way to shelter your estate against the costs of probate is through a revocable living trust, also known as an inter-vivos trust. These were designed to help individuals bypass the probate process. The process is to simply create the trust document and then transfer the property titles into the trust. Individuals will oftentimes name themselves as the trustee to keep total control of the trust assets. While setting up and transferring assets into a revocable living trust does not change an individual's ability to use and access the assets, moving the assets to the trust thereby removes them from being subject to probate. When effectively used, revocable trusts can own a substantial amount of an individual's assets, leaving very few pieces that must go through the legal system. This helps to lower probate costs and streamlines the administration of the estate following death.

MCF focuses on holistic financial planning – and estate planning is a very important piece. Establishing a will and/or trust is wise for many reasons, but perhaps the best result of doing so is the relief it will provide knowing you’ve helped reduce probate costs in order to optimize your assets for your family. Please reach out to me to discuss ideas on how to best structure your estate. 

Source: Investopedia, “Probate”. 

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