Many people are diligent about saving and managing their money so that when they pass, they'll be able to leave as many assets as possible to their heirs. But depending on the size of your estate, your beneficiaries may lose out on a portion of their inheritance due to the need to go through a procedure known as probate.
Probate is the legal process of proving that a deceased person's will is valid. Though the details vary on a state-by-state basis, it is often complex and lengthy, typically involving court appearances and paperwork by estate-planning attorneys whose fees eat away at beneficiaries' inheritances. It's for this reason that many people take steps to avoid probate, especially if they have larger estates.
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How probate works
When a person dies, the executor of his or her will (or, if one isn't named, an individual appointed by a judge) is tasked with proving the validity of that will in probate court. The executor must present the court with not just the will, but a complete rundown of the deceased's assets and debts. The executor must then follow the court's instructions in managing those assets until the probate process draws to a close and the beneficiaries of the will receive their inheritance.
Smaller estates can often avoid probate entirely or qualify for an abridged version of the typical process. However, estates whose values exceed certain thresholds (as dictated by each state) must comply with the probate process in full.
Drawbacks of probate
One major drawback of probate is that the process can be costly. The fees involved are typically paid from the deceased's estate. Furthermore, because the process is often lengthy, heirs might have to wait several months, a year, or even longer to receive their inheritance (though many states do grant immediate family members some estate funds during the process so they can stay afloat financially as they wait for probate to conclude).
Avoiding probate
Because probate rarely benefits those who stand to inherit assets, many people work with attorneys while they're alive to avoid the process once they pass. There are a few strategic estate planning moves that can help you avoid probate. You might, for example, set up a revocable living trust, which exempts your assets from probate. Or, you might establish joint ownership for certain assets to exclude them from the probate process. You might also consider gifting certain assets to people while you're alive rather than leaving them to your beneficiaries in a will.
If you don't expect to leave much behind in the way of assets, then taking steps to get around probate may not be worth your time, money, or effort. But if you do expect to pass with a substantial estate and want your beneficiaries to collect as much as possible, it pays to consult an attorney and see what options you have for avoiding probate.
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