What is probate and can you avoid it?

When you pass away after a hopefully long life of accumulating assets, your estate is reviewed in probate court. Probate is the legal process in which a will is reviewed to first determine if the will is valid, and then to distribute the deceased's assets accordingly. If there is no valid will in place (a will can be invalid for the seemingly smallest of reasons, so make sure you draft a will with an estate attorney), state law will determine the delegation of your assets.

Let's assume you made a will, in which case you are a testator. During the drafting of your will you should have named an executor of your last will and testament. The executor is the person you want in charge of administering this probate process (many people choose family, friends, or legal professionals such as a financial advisor). If there was no said appointment, the court will appoint one for you. The executor is responsible for filing the will and overseeing all of your assets during the probate process. Make sure you name someone you trust.

Probate can be timely, if not costly. The probate process typically takes 6 to 12 months to complete, so if your heirs are expecting those assets they will at least have to be patient! If creditors need to be paid off from past debts, the probate process will give them a chance to make their claims before the remainder of the estate is distributed per your last will and testament.

There are ways you can avoid the long probate process, including creating a trust for your assets or placing certain beneficiary designations on accounts. Trusts have their advantages, especially on larger and more complex situations, but the simplest thing you can do is designate accounts as TOD (transfer on death), utilize JOWRS (joint owners with right of survivorship) designations (common for married couples), and proper beneficiary designations on qualified retirement plans (like your 401k or IRA). When accounts are designated in these ways, the ownership of the account bypasses the probate process and transfers directly into the beneficiary's or joint owner's name. This can save a lot of time, hassle, and potentially lots of money for your heirs upon your passing.

Use this post as a reminder to get a will drafted by an estate attorney and double check all of you financial accounts to make sure they are properly designated according to your true wishes. As life changes, your wishes can change to, so it's important to review your will and accounts every few years (or when life changing events occur). #probate #estatetax #will #lastwillandtestament

-Your Friends at Red Oak Financial Group