Managing and securing your estate is one of the most important steps in personal finance. An estate plan ensures your assets get distributed according to your wishes. In addition to mitigating confusion and hardship for your loved ones, it also limits the court’s control over your assets in probate.
What is probate?
Probate is the legal process for reviewing, managing and distributing someone’s estate after they die. The purpose of probate is to verify the validity of your estate plan. It includes reviewing the legitimacy of wills, handling any outstanding debts and taxes, appraising property values and dividing assets among heirs.
The probate process is in place to protect your estate, working to prevent fraud after your death. But this legal proceeding doesn’t look the same for everyone. Some assets are required to go through probate — especially if you die without a will or fail to name beneficiaries for some of your accounts.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Assets subject to probate
Real estate properties with a single owner who is deceased will most likely have to go through probate. This includes properties such as single-family homes and condominiums. If the deceased homeowner has a will, the court will distribute the home according to the instructions left in the will. The property will be distributed according to state laws if the owner doesn't have a will.
Vehicles such as cars, motorcycles and boats will probably have to go through the probate process, too. If there’s a will, the vehicle will be distributed accordingly, but the process gets more complicated if there isn’t. Specific rules and regulations vary depending on the state you live in.
Personal belongings like art and jewelry must go through probate. If these items are of high value, they’ll also need to be appraised.
Bank accounts, life insurance policies, stocks and bonds owned solely by the deceased person must all go through probate if a beneficiary is not named.
Probate can be long and costly
Settling an estate through probate is no quick process. The size of the estate, the value of certain assets, and state-specific probate laws can all impact the length of time it will take to finalize the estate. The situation can become even more complicated and drawn out if there are questions or concerns about the validity of a will, or if the family cannot agree on the division of assets.
The amount of time it takes to settle the estate will also affect how much you’ll pay to go through the probate process. You’ll be required to pay certain expenses, including outstanding debts, court and filing fees and lawyer costs. You may also be required to pay a state inheritance tax, if you live in one of the six states that impose them on some recipients.
Probate laws vary
Where you live, the size of your estate and the value of your assets all impact the probate process. In some states, estates that don’t meet a certain monetary value may be able to bypass these proceedings entirely. Similarly, certain assets in the estate aren’t subject to probate so long as they have beneficiaries designated. These assets range from pension plans, life insurance plans, medical savings accounts and IRAs. Additionally, due to survivorship rights, assets jointly owned typically aren’t required to go through probate.
Some other strategies for getting around probate include utilizing a trust or distributing assets to heirs via affidavit.
Probate can be a lot to handle, especially following the death of a loved one. But if you’re proactive with your estate planning, the probate process should be a last resort for surviving family members. Creating a concise, detailed will and naming beneficiaries to any accounts can help your loved ones avoid these proceedings, potentially saving them time and money, while mitigating any feuds or disagreements.
Pat Simasko is an investment advisory representative of and provides advisory services through CoreCap Advisors, LLC. Simasko Law is a separate entity and not affiliated with CoreCap Advisors. The information provided here is not tax, investment or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Related Content
- Leaving Property to Multiple Heirs? What to Consider
- Naming Beneficiaries for Inherited IRAs: What You Need to Know
- The Basics of Estate Planning
- What Assets Should You Put (or Not Put) in Your Trust?
- How Quitclaim Deeds Can Cause Estate Planning Catastrophes
-
The Seven Best-Paying Side Gigs For RetireesIf you're worried you won't have enough saved for a comfortable retirement, or that life after work will be boring, these well-paid roles could be the answer.
-
$40,000 CD vs $40,000 High-Yield Savings Account - 3 Things Savers Should Consider NowBoth options offer risk-free methods to grow your savings. Learn how much you can earn with each, how they differ and which one suits you best.
-
Gray Divorce Can Throw Your Retirement a Curveball: What to KnowIf you're entering retirement and going through a divorce at the same time, you've got some work to do to shore up your long-term financial security.
-
I'm a Real Estate Investing Expert: Optional 721 UPREIT DSTs Can Be the Best of Both WorldsBefore investing in any 721 UPREIT exchange, look for one that offers a straightforward, investor-friendly exit.
-
How an Expired Passport Thwarted Blackmail (and What Other Important Documents You Should Keep)An optometrist produced his expired passport to foil a blackmail attempt by the daughter of a former employee. After proving he was out of the country on the date of a forged diary entry, he took it a step further.
-
Optimize, Grow, Retain: The Power of Annual Client ReviewsFinancial advisers can use annual reviews to help enhance client outcomes, strengthen relationships and build their practice.
-
I'm a Real Estate Investing Pro: This Is What Investors Should Know About Truck Stop InvestmentsTruck stops might seem like good investments, but they can actually be a risky gamble due to unstable fuel prices, unreliable operators and coming changes in transportation. Instead, consider safer options like industrial or residential properties.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary FormsStandard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams NowBeyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on RetirementWhile some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
