Probate 101: Everything You Need to Know

Probate is the legal process in which a deceased person’s property is distributed according to their will or state law (according to the American Bar Association). While often necessary, it can be a costly and time-consuming process. But how exactly does it work? Can one avoid it? Do all estates qualify? Keep reading to find out more!

How Does Probate Work?

If the deceased had a will, the court will use this document to guide the distribution process. However, many people do not have a will. In cases like these, state law determines the distribution of assets. Additionally, courts oversee the distribution of the deceased person’s assets to their beneficiaries. The process usually process lasts a year or longer. Not only do costs vary from state to state, but they also depend on the size of the estate.

How Do I Know If My Estate Will Have to Go Through Probate?

Generally, probate is required if the deceased owned assets that didn’t pass directly to a beneficiary upon death. Assets such as a home or other real estate, bank accounts, and investments will likely need to go through probate. However, some assets, such as payable-on-death accounts, may be exempt.

Do all Estates Go Through Probate?

Not all estates go through probate. If the value of the estate is small, the estate may be able to bypass it altogether. Since each state has different rules, check your state’s laws to see if yours qualifies for an exemption.

What Does Probate Cost?

Probate costs vary depending on a case-by-case basis, but many factors determine the associated fees. In general, the costs take up approximately 3% to 8% of the estate. These fees may include court filing, attorney, appraisal, and executor fees. Additionally, complex estates may require even more fees. Costs may also be dependent on each state’s individual probate laws. For example, some states have a simpler process that may incur fewer fees.

Who Pays for Probate Fees?

Probate fees typically come from the estate of the deceased. Beneficiaries must split a percentage of the charges. Alternatively, if the estate can’t cover the fees, the cost may fall on the next of kin. Unfortunately, many families may have to pay the fees out-of-pocket. This can be a significant financial burden. However, there are certain steps that may allow you to avoid probate altogether.

How Can I Avoid Probate?

There are several ways you might be able to avoid probate. For instance, designating beneficiaries for your bank accounts, mutual funds, IRA accounts, and life insurance policies may help you avoid the probate process. Another method is opening a living trust. Once placed in a living trust, your assets will automatically pass on to your beneficiaries in the event of one’s death.

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