Creating a successful estate plan requires you to think about much more than just how you want your estate assets to be distributed when you are gone. Precisely which additional estate planning goal and objectives you decide to incorporate into your comprehensive estate plan will depend on numerous factors; however, one common estate planning goal is probate avoidance. Why is it so desirable to avoid probate though? To help answer that question, we explain the probate process and why many people prefer to avoid it through careful estate planning.
The Probate Process
Most people leave behind an estate when they die. That estate consists of all assets, both tangible and intangible, owned by the decedent at the time of death. Probate is the legal process by which those assets are identified, located, valued, and eventually distributed to the intended beneficiaries and/or legal heirs of the estate. If the decedent left behind a valid Last Will and Testament, the individual named as the Executor in that Will is responsible for overseeing the probate process and the terms of the Will are used to determine how the estate assets are distributed. If the decedent died intestate (without a Will), someone typically volunteers to be the Personal Representative, referred to as the Administrator, and oversee the probate of the estate and the California intestate succession laws dictate how estate assets are distributed. Although the probate process is unique for every estate, common steps in the process include:
- Identifying, locating, and valuing all estate assets.
- Opening the probate of the estate by filing a petition, along with an official death certificate, in the appropriate court.
- Notifying creditors of the estate that probate is underway.
- Identifying, locating, and notifying beneficiaries and/or heirs of the estate that the estate is being probated.
- Reviewing and approving or denying creditor claims.
- Prioritizing and paying approved claims.
- Selling assets, if necessary, to pay creditors.
- Defending any challenges to the Will or litigating any claims made by creditors that were denied.
- Calculating any paying federal (and state, if applicable) gift and estate taxes
- Effectuating the legal transfer of the remaining assets to the named beneficiaries and/or legal heirs of the estate.
Reasons to Avoid Probate
Probate is a burdensome, time-consuming, and expensive endeavor. Probating even a fairly modest estate without complex assets will typically take many months because of the time given to creditors to file claims and appeal denials and the congested court calendars. As a general rule, the more complex and valuable the estate assets are, the longer it will take to probate the estate. Keep in mind that estate assets remain out of reach to beneficiaries/heirs until the probate process is finished. If the estate becomes involved in litigation, it can easily take a year or two ( or even longer) to conclude the probate process. In addition, everyone involved in the probate process is entitled to a fee, including appraisers, attorneys, accountants, and the Executor. Those expenses are paid out of the estate assets, thereby diminishing the value of the estate left over to pass down to the decedent’s loved ones. Ultimately, probate avoidance is a common goal because it saves both time and money.
How Can Your Estate Avoid Probate?
Your estate planning attorney can help you decide which strategies and tools will work best in your estate plan to help your estate avoid probate; however, the key is to convert as many assets as possible to “non-probate” assets. Non-probate assets are not required to go through probate. Examples of non-probate assets that bypass probate include:
- Assets held in a trust
- Proceeds of life insurance policies
- Assets held in accounts designated as “payable on death (POD)” or “transfer on death (TOD)”
- Assets held jointly with rights of survivorship
- Certain types of retirement accounts
Contact Probate Lawyers
Please download our FREE estate planning checklist. If you have additional questions regarding how your estate can avoid probate, contact us at the Northern California Center for Estate Planning & Elder Law today by calling (916)-437-3500 or by filling out our online contact form.