Is Probate Bad? Understanding the Pros and Cons of Probate

Whether or not you have an estate plan in place, you have likely heard the term “probate.” Probate is the legal process through which a deceased individual’s assets are distributed under court supervision. This process is generally necessary for assets owned solely in the name of the deceased person. Probate is governed by state law.

Because probate can involve court oversight, paperwork, costs, and delays, many people consider avoiding it when creating an estate plan. However, probate is not always a bad thing. Whether avoiding probate makes sense for you depends on your assets, family circumstances, and estate planning goals.

Avoiding Probate

One appealing aspect of estate planning is the ability to avoid probate. One way to do this is to ensure that assets are not titled solely in the decedent’s name or to provide for an automatic transfer of ownership at death. Options may include joint tenancy with rights of survivorship, transfer-on-death (TOD) or payable-on-death (POD) beneficiaries, or a trust.

Joint ownership can make it easy to create and transfer property ownership. However, this approach can also create its own concerns.

TOD and POD accounts can be efficient because, upon the account owner’s death, they can transfer the account outside of probate to the named beneficiary. They are also typically easy and inexpensive to set up. However, the account generally transfers directly to the beneficiary without creditor protection.

Another popular way to avoid probate is through the use of a trust. When you place assets in a trust, the trust, rather than you individually, owns those assets. You may still control and benefit from the assets according to the terms of the trust. Because the trust owns the assets, those assets generally do not go through probate.

Learn more about wills and trusts and how they can fit into an estate plan.

Important: If your estate plan consists only of a will, the will generally goes through the probate process. However, having a will allows you to determine who receives your assets rather than leaving those decisions entirely to the court and applicable intestacy laws.

Is Probate Really a Bad Thing?

While there are several estate planning tools that can be used to avoid probate, probate is not always a bad thing. In some situations, it provides a formal process for administering an estate, addressing debts, and distributing assets according to a valid will or applicable state law.

Benefits of Probate

A probate court can help ensure that the intentions and wishes stated in a person’s will are carried out after their death. The process can also provide a way to address debts and outstanding taxes owed by the estate. This can provide finality to the affairs of the deceased and their surviving family members.

If the deceased had outstanding debts, the probate process may also give creditors a limited period to file claims against the estate. Depending on the circumstances, this can help resolve outstanding claims and provide greater certainty about the estate’s obligations.

Estate administration can also involve federal tax responsibilities. The IRS explains that an estate administrator may be responsible for collecting assets, paying creditors, and handling certain tax filings for the estate. Learn more about estate administrator responsibilities from the IRS.

Downsides of Probate

Although probate can have benefits, there are also potential downsides. One concern is cost. Filing and inventory fees imposed by probate courts can create an additional expense for the estate.

The process can also be time-consuming. The amount of time required varies by state and by the complexity of the estate. In some states, probate must remain open for a minimum period to allow creditors to file claims. More complicated estates can take even longer to administer.

Privacy can also be a concern. Wills and other documents filed with the court may become part of the public record. This means that people may be able to access information about the estate and how assets are distributed through the probate process.

Finally, probate can limit the control that the deceased and their family have over the distribution process. If someone dies without a will, the probate process generally determines how the deceased person’s assets are distributed under the state’s intestacy laws.

What Does Probate Mean for Your Estate Plan?

Whether probate is right for your situation depends on your assets, family circumstances, state law, and overall estate planning goals. Avoiding probate is not always the only or best objective when creating an estate plan.

A well-crafted estate plan can help you understand which assets may pass through probate and which may pass outside of probate. It can also help ensure that your wishes are clearly documented and that your loved ones are prepared to handle your affairs.

For some families, a trust may be an important part of their estate planning strategy. A trust can also create responsibilities for the people who administer it after your death. Learn more about trust administration and the role of trustees in managing and distributing trust assets.

Federal estate tax rules are separate from state probate laws. If you have questions about potential federal estate tax obligations, the IRS provides current information about estate and gift taxes.

Get Advice About Probate and Estate Planning

If you have questions about the probate process or intestacy laws in your state, contact us to schedule an appointment. Whether you have a little or a lot, a well-crafted estate plan can help you understand your options, address probate concerns, and make sure your loved ones are taken care of when you are gone.

Learn more about estate planning and how to get started.