Q. What's "probate"?
A. According to nolo.com, "Probate is a legal process that takes place after someone dies." This process includes (again, from nolo.com):
- Proving in court that a deceased person's will is valid (usually a routine matter)
- Identifying and inventorying the deceased person's property
- Having the property appraised
- Paying debts and taxes, and
- Distributing the remaining property as the will directs.
Part of the process also includes transferring title and ownership of various assets to the inheritors.
If this all sounds like a complicated hassle, it is. It can be a costly one, too, involving lots of paperwork and fees to people such as lawyers, accountants, appraisers, and executors, as well as court costs. All these costs would otherwise have gone to beneficiaries. Probate costs can amount to roughly 5% to 10% of the value of the estate. So with an estate worth $200,000, probate could eat up $10,000 to $20,000 -- a sizable chunk. In addition, property remains in a kind of limbo while in probate -- and that can last months or even years.
Probate has some good points, though. For example, it tends to be a methodical and unbiased system, since a judge oversees it.
For most people, the downside of probate overshadows the upside, so it's best avoided. And, it can be avoided, if you take the time to learn more about it and take some actions.
Learn more about estate planning issues at Estate Planning Links.
And if you'd like an actual person (a financial pro, no less) to talk to about your tax concerns and your financial planning needs, look into our TMF Money Advisor. It's a valuable service we're offering, featuring customized independent advice from a variety of objective financial experts. You need to make sure you're saving enough and well enough to meet your life's needs -- if you need some help doing that, look into this offering.
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This question and answer is adapted from The Motley Fool Money Guide: Answers to Your Questions About Saving, Spending and Investing. For answers to this and 499 other common money questions, check it out -- it's a handy resource.
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