Planning your estate can be a difficult process fraught with many legal pitfalls. Just choosing to develop an estate plan is a good first step, but having a plan alone is not necessarily enough to guarantee that your assets will be distributed smoothly and properly to your beneficiaries. In particular, it is important to understand which of your assets may potentially need to pass through probate court. Probate has the potential to be a lengthy, and sometimes expensive, process, so it is important to keep it in mind during your estate planning.
What Is Probate?
Probate is essentially the court-administered distribution of your assets. It will also include handling any outstanding debts that your estate is required to pay. During the probate process, the court will appoint an individual to administer your estate while probate is ongoing. Note that a will does not remove the need for a probate process in most cases. Instead, the presence of a will is used to direct the court-appointed executor in how the estate's assets and debts should be managed. The process of executing an estate can be complex, and it is generally done with the assistance of a probate attorney.
Do All Assets Go Through Probate?
Not all assets are required to go through probate. In fact, depending on the size of your estate and number of assets, it is possible that the majority of your assets will not need to pass through probate at all. The two simplest cases of assets that do not have to pass through probate court are assets that automatically pass onto designated beneficiaries, and assets that are shared.
The first category generally includes insurance policies or retirement funds, as these accounts usually require designated beneficiaries to be assigned when they are opened. The second category of assets is more open. Essentially, any asset where ownership is shared will automatically pass to the other owner without probate court becoming involved. This is an important point to understand, because shared assets will not be distributed to beneficiaries and will remain under the control of the surviving owner.
What About A Living Trust?
Living trusts are a complex topic worthy of articles (and books) all their own. In general, they are documents that protect your assets from entering probate court. You assign assets to the trust, and those assets are in turn managed by the trust rather than by you. The successor trustee, the individual responsible for managing the trust, will distribute your assets after your death. This guarantees that the assets are distributed according to your wishes, without the intervention of probate court.