Spooky or not - will probate give you a fright?

If you are like most of our clients, you have heard rumors and rumblings about probate. What is it, why should you care and what should you do? Read further for answers to these questions. 

What is probate?

Probate is a legal proceeding in which a person’s property is distributed to their beneficiaries at death pursuant to their will (or applicable state law, known as intestacy, if there is no will).    

Is probate required?

Probate is required to transfer property in your name alone when you die. Probate may also be required for other less common reasons (for example, to deal with ongoing litigation). Importantly, probate is not required to transfer joint tenancy property (which automatically passes to the surviving joint owner when you die), property with a valid “pay on death” beneficiary designation in place (such as life insurance or retirement accounts) or property held by a trustee in trust. 

Is probate bad?

In and of itself, probate is not bad. However, there are some common reasons that many people wish to avoid probate. The three main reasons are:

1. Time. Some states have a streamlined probate process that is relatively efficient. Other states, like California, do not. The entire probate process in California can take an average of 1-3 years to complete.
2. Cost. Probate fees are determined by state law. In California, probate fees are set by statute as a percentage of the value of your property subject to probate. For example, statutory fees to the executor and the attorney for the executor are nearly $46,000 in an estate with a value of $1,000,000. Additional legal and executor fees may be incurred depending on the complexity of the estate. Also, if you own property in multiple states, it is possible that probate proceedings in a variety of different states may be required to transfer your assets.
3. Privacy. Probate court proceedings are public. Anyone is able to obtain and review filings in probate court. If keeping family matters and financial information private is a priority, ensuring that planning is done to avoid probate is a priority.

What should you do?

99% of the estate plans we do for clients are designed to avoid the need for a probate proceeding. This is because our goal is to achieve the most efficient process for our clients and their families possible. The most common way we do this is by creating a revocable living trust for clients. A revocable living trust is essentially a will substitute that avoids the need for probate, but only if your assets are properly titled in the name of that trust while you are living. If you have any questions about probate or whether your estate plan successfully avoids it, please feel free to contact us.

This article was written by Lilith Mansuryan.