You’ve probably heard the term “probate,” which refers to the legal process a deceased person’s estate must undergo before it closes and assets pass to beneficiaries or heirs. A closely related term is probate estate.
In simple words, a probate estate is an estate going through probate. What does it include, and is it possible to bypass formal probate?
Probate Estate: The Basics
Probate estate refers to all the property the decedent held in their name, including bank, investment, and retirement accounts, titled items (like real estate and vehicles), and non-titled items (like jewelry, art, and collectibles). Money that someone owes to the deceased person’s estate, like proceeds from a wrongful death lawsuit, is also part of the probate estate.
In contrast, non-probate assets include any property not subject to probate, such as property the decedent transferred to a revocable living trust during their lifetime or assets that automatically pass to a beneficiary or surviving co-owner upon death.
Which Assets Must Go Through Probate?
Probate is the default option for most assets. In other words, unless the deceased person made a specific provision to keep the asset out of probate during their lifetime, it will be part of the probate estate.
Probate assets typically include:
- Any property in the decedent’s name only, like houses and cars, bank and investment accounts, or businesses
- Personal property like furniture, appliances, jewelry, and collectibles
- Tenancy-in-common assets, like real estate or land, bank accounts, or brokerage accounts
- Assets that were supposed to go to a designated beneficiary who had passed away
Which Assets Are Exempt From Probate?
Some assets won’t need to go through probate but will pass directly to beneficiaries or heirs. This arrangement can save families a lot of time and hassle. Non-probate assets include:
- Assets that the decedent placed in a trust during their lifetime
- Assets with designated beneficiaries, like payable-on-death bank accounts, transfer-on-death titles, and life insurance policies
- Jointly owned assets with right of survivorship
How To Keep Property Out of Probate
A solid estate plan can keep many assets out of the probate estate and ensure beneficiaries receive their inheritance faster.
Many estate owners set up a revocable living trust for this purpose. Once a property passes into a trust, it’s no longer held directly under the owner’s name and thus isn’t subject to probate. The trust creator can still access, manage, and transfer trust assets as needed throughout their lifetime. Once the trust creator dies, the assets pass to beneficiaries according to the trust terms.
Some people also choose to gift property to family members before they pass. While this can be a convenient solution, it comes with some potential drawbacks, like gift tax and capital gains tax. It’s always advisable to consult a legal professional before transferring significant assets.
Holding property jointly with a family member can likewise exclude assets from probate. Joint ownership is common between spouses, but some estate owners also choose to add an adult child to a title.
Simplifying Probate
Some estates qualify for a simpler and quicker probate, sometimes known as informal or summary probate. This simplified procedure can save families a lot of time and money. Summary probate usually requires a small estate affidavit or a one-time court petition rather than the full court process.
Each state specifies a different threshold amount below which an estate can undergo informal probate. For example, in New York, executors can file for simplified probate if the total worth of the decedent’s property, excluding real estate, is up to $30,000. Some states also limit the number of beneficiaries or heirs for this probate option.
How Long Does Probate Take?
When formal probate is indispensable, the process usually takes at least several months to a year. However, the probate process can be a lot longer if:
- There’s no will, or some of the beneficiaries argue that the will is invalid
- Some beneficiaries or heirs are hard to locate
- The decedent’s probate estate is very large, heavily encumbered with debt, and/or includes assets in several states
- The beneficiaries dispute the executor’s appointment and want someone else to handle the estate administration
What Are the Steps of Probate?
The probate process starts with filing for probate, usually either in the decedent’s last county of residence or in the county where they held most of their assets.
If the decedent’s will specifies an executor, the court will usually approve them and grant them authority to administer the estate. Otherwise, the court will appoint a qualified person who is ready to take on the executor responsibilities listed below.
Asset Inventory
The executor will need to provide a full list of the assets belonging to the probate estate, including their values. They also need to keep the assets secure throughout probate.
Creditor Notification and Debt Payment
The executor must notify any of the decedent’s potential creditors of the probate and usually publish notice of the probate in a local newspaper. The creditors have limited time (varying by state) to make claims. The executor will use estate funds to repay any valid debts.
Estate Management and Paying Bills and Taxes
The executor’s duties also include keeping the property in good condition during probate. For example, they’ll take care of any necessary repairs to the decedent’s house and pay utility bills and homeowners’ insurance. They’ll also file the decedent’s final tax return and pay any state or federal taxes.
Asset Distribution
After the executor discharges any debts, taxes, bills, attorney fees, and other financial obligations, the beneficiaries or heirs can receive their portion of the estate, which concludes probate. The executor is also entitled to a fee for their services, either according to the will’s terms or following state guidelines.
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