Probate is a legal process used for the administration and distribution of a deceased’s estate. It involves validating the will, inventorying assets, paying debts and distributing those assets. As a result, it can be a lengthy and expensive process. However, there are times when probate isn’t necessary, such as when the deceased has a living trust, property is jointly owned with rights of survivorship, or when accounts have designated beneficiaries.
If you have questions about estate planning, consider reaching out to a financial advisor for help exploring your options.
Two Ways Probate Isn’t Necessary
Living Trust
A living trust is a type of trust and estate planning tool that allows assets to be transferred to beneficiaries without going through probate. Upon the death of the trust creator, known as the grantor, the assets held in the trust are managed by a successor trustee. This individual, appointed by the grantor, is responsible for distributing the assets according to the terms of the trust. Unlike a will, which must be validated through probate court, a living trust remains a private document and does not require court intervention.
A living trust has several benefits:
- Immediate asset transfer: Since the trust outlines clear instructions for the distribution of assets, the successor trustee can begin the process without delay.
- Privacy and control: Probate is a public process, meaning anyone can access the details of the deceased’s estate. In contrast, a living trust is not filed in court, keeping the details of the estate and its distribution private. This privacy can be crucial for families who prefer to keep their financial affairs confidential.
- Avoiding probate costs: Probate can be expensive, with fees for court filings, attorney’s fees and other administrative expenses. These costs are typically paid from the estate, reducing the amount left for beneficiaries. A living trust avoids these expenses, thereby ensuring that more of the estate’s value is preserved for the intended recipients.
Jointly Owned Property
Jointly owned property can also bypass probate, simplifying the transfer of assets to surviving owners. This typically occurs with joint tenancy or tenancy by the entirety, where property is owned by two or more individuals with rights of survivorship.
Here are three additional instances involving property in which probate isn’t necessary:
- Joint tenancy: In a joint tenancy, each owner has an equal share of the property. Upon the death of one owner, their share automatically transfers to the surviving joint tenant(s) without going through probate. This transfer happens immediately, based on the right of survivorship, making the process seamless and avoiding the delays and costs associated with probate court.
- Tenancy by the entirety: Tenancy by the entirety is a form of joint ownership available to married couples in some states. Like joint tenancy, it includes the right of survivorship, meaning when one spouse dies, the surviving spouse automatically inherits the entire property. This method provides added protection against creditors and further simplifies the asset transfer process.
- Community property with right of survivorship: In community property states, spouses can own property together as community property with the right of survivorship. This arrangement can allow the surviving spouse to inherit the deceased spouse’s share without probate. It combines the benefits of community property ownership with the efficiency of bypassing probate.
Other Ways in Which Probate Isn’t Necessary
Certain assets, such as life insurance policies, retirement accounts and payable-on-death (POD) or transfer-on-death (TOD) accounts, also bypass probate if they have designated beneficiaries.
In some states, estates that fall below a specific value threshold may be entirely exempt from probate. This means that the estate can be distributed to heirs without any court involvement. Beneficiaries can claim the deceased’s assets directly by presenting the death certificate and proof of their relationship to the deceased.
Depending on the state and size of the estate, there is also a simplified probate process. This process, sometimes called summary probate, involves fewer court appearances and less paperwork. The executor or personal representative may be allowed to settle the estate by filing a small estate affidavit, a document that attests to the estate’s value and outlines the assets and debts. This affidavit often allows the transfer of assets without formal court proceedings, minimizing legal costs and delays.
Bottom Line
Probate can be a lengthy and expensive legal process that settles a person’s estate following their death. However, there are several scenarios in which probate isn’t necessary, such as with a living trust or jointly owned property. Know how and when to use these estate planning tools can help you protect and distribute assets efficiently, while minimizing legal issues.
Estate Planning Tips
- If you’re unsure whether a trust belongs in your estate plan, you don’t have to go it alone. A financial advisor can help you create a plan to help you reach your goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Estate taxes can be hefty, but you can maximize inheritance for your family by gifting portions of your estate in advance to heirs, or even setting up a trust.
- Some inherited assets can have tax implications. Before you spend or invest your inheritance, read more about inheritance taxes and exemptions.
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