Probate is the legal process that verifies a deceased person's will is valid, locates and appraises assets, pays expenses, and distributes property to heirs. Probate tends to be costly due to the lawyer and court fees, but you can avoid probate by planning ahead and designating who will inherit your assets.
Probate laws and process
Probate laws vary by state, but the process is similar throughout the U.S. If you make a will, you can name an executor to oversee the probate process for your will. If you don't name an executor or if you die without a will, the court will appoint an executor.
The executor will notify relatives and people you owed money to that you have died. The executor will then identify all of your assets and have them appraised to determine their worth. The executor may also make important decisions such as whether to sell your home or assets to pay your debts.
The probate process can take a year or more to conclude, depending on whether disputes arise between heirs. Immediate family members may be able to get some money from the estate while they wait. Ultimately, the court will have the executor pay your debts and divide your assets among the people or organizations your will designates as your heirs.
You can challenge a will during probate, but it is difficult to win. You would have to prove that the maker of the will was not competent when it was written, or that the will was made under pressure from someone who stood to benefit. If you plan to challenge a will in probate, you will need an attorney specializing in estate issues to take your case to the probate court.
Planning to avoid probate
Since probate costs money that would otherwise go to your heirs, it's a good idea to plan ahead to avoid probate, especially if your estate is not large or complex. If your estate is small, depending on your state's laws, it may be exempt from probate. In most states, your spouse will automatically inherit your assets without going through probate, unless you specify otherwise in your will.
Ways you can avoid probate:
- Name a beneficiary on your retirement accounts. This will allow funds in any IRA or 401(k) account to go directly to your designated heir. Note that assets accumulated during your marriage are considered half the property of your spouse, so you may only be able to designate half the funds to any other person.
- Payable-on-death bank accounts. You can fill out a form at your bank that instructs the bank to give the money in your account to a particular person when you die.
- Transfer-on-death registration of securities. This is the equivalent of payable-on-death bank accounts, but for stocks, bonds, and other securities. You simply name the person you want to inherit the securities on a beneficiary form.
- Transfer-on-death vehicle registration. Some states allow you to name a beneficiary for your car when you die.
- Create a living trust. You can transfer ownership of your assets into a trust that you oversee until your death. You will name a successor trustee who will take over after you die and distribute the assets for you.
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