Most families assume that having a will protects them from probate. Unfortunately, in most cases, it doesn’t. In this video, I break down exactly what probate is, what it costs your family in time, money, and privacy — and four strategies to help your loved ones avoid it.
Transcript
When we think about passing assets onto our family, we might think about what we leave, but not necessarily how it passes hands.
Probate, which is the legal process that happens after someone passes away, can often take months, and can cost families thousands in legal fees.
However, with the right planning, a significant amount of probate can be minimized or avoided entirely.
Today, I’m breaking down probate, what it actually is, how it works, and four ways to help make sure your family never has to deal with it. This topic may especially speak to you if you’ve lost someone and had to go through this process yourself. If that’s you, know that you’re not alone.
I’m Rachael Bourke, a financial advisor with Hello Inheritance, where we help women and couples navigate the financial and emotional realities of inheriting wealth.
The Basics of Probate
What is probate, really? Probate is essentially how the court validates a will, if there is one, and oversees the distribution of assets to the right people.
Now, here’s what a lot of people don’t realize. Probate doesn’t just happen when someone dies without a will. Even if you do have a will, your estate may still go through probate. A will is essentially a set of instructions for the court, but it still needs to be validated.
And if someone dies without a will, that’s called dying “intestate.” In that case, the court decides who gets what based not on your wishes, but on your state’s laws.
Why should I care about probate?
There are three big reasons.
Number one: Time.
Probate can take months and in some cases even over a year. During that time, your family may not be able to access bank accounts, sell property or use those assets even if they are the rightful heirs.
Number two: Cost.
Probate is not free. It can involve court costs, attorney fees, and executor or administrator fees. And in some states, those fees are tied to the value of the estate. In some cases, we’re talking thousands or even tens of thousands of dollars that come out of what your family inherits.
Number three: Privacy.
For the most part, probate is a public process. That means anyone can look up what debts you had, what you owned, and who you left it to. This is one that surprises people.
So how can we avoid this?
Four Strategies to Avoid Probate
Here are four strategies that can help your estate skip probate or at least minimize it significantly.
Number one, and this is the big one, a Revocable Living Trust.
A trust is a legal entity that holds your assets while you’re alive and then transfers them directly to your beneficiaries when you pass without the court involved. Instead, a person or professional that you chose acts as trustee and handles your estate according to your wishes as laid out in the trust.
A key word here to note is revocable. That means you can change it anytime. You can add assets, remove them, change beneficiaries. It’s flexible.
But there’s a catch. A trust that isn’t funded is just a piece of paper. You have to actually fund the trust. That means transferring ownership of your assets like investment accounts and real estate into the trust’s name.
Number two, beneficiary designations.
This especially applies to things that can’t be transferred to a trust, like life insurance policies, 401ks, IRAs, and even some bank accounts. When you name a beneficiary, the money goes directly to that person when you pass.
It doesn’t go through probate.
But here’s what we see happen all too often. People set their beneficiaries when they first open an account and then never update them. In most cases, beneficiary designations overrule wills and other estate documents.
Action Item: Please check your beneficiaries and make sure to check them every few years or after major life events like births, marriages and deaths.
Number three, joint ownership with right of survivorship.
If you own property jointly with someone, say your spouse, and the title includes “right of survivorship,” then when one owner passes, the other automatically becomes the full owner, no probate needed.
This works well for married couples, but I’d be cautious about becoming a joint owner with a child. There can be tax consequences and it can create complications, especially if that child has creditors or goes through a divorce. So talk to a professional before going that route.
And number four, small estate exemptions.
Most states have some kind of simplified process for smaller estates, but the thresholds vary widely by state. If your estate qualifies, your family can use what’s called a Small Estate Affidavit to transfer assets without going through full probate. It’s worth knowing your state’s threshold because it can save your family a lot of time and money.
Biggest Mistakes
Now before I let you go, I want to talk about some of the biggest mistakes we see families make when it comes to probate.
Number one is assuming that having a will is enough.
A will is important, don’t get me wrong, but a will goes through probate. It doesn’t avoid it. A will tells the court what you want, but a trust actually does it without the court’s involvement.
The other mistake is procrastination.
I get it. Estate planning is not the most inviting Saturday afternoon activity, but the families I’ve worked with who have had the hardest times are the ones where nothing was set up in advance. No trust, outdated beneficiaries, and suddenly they’re both grieving and navigating a stressful legal process.
You don’t have to have everything figured out today, but even one step like updating your beneficiaries or having a conversation with your spouse about a trust can save your family months of stress.
The Gist
So let’s recap. Probate is the court process that happens after someone passes away. It can take months and cost thousands of dollars, but with the right planning, like a Revocable Living Trust, your family can avoid most or all of it.
Here’s what I want you to do. In the comments below, tell me, have you or someone in your family gone through probate? What was that experience like? Our stories carry a lot of power, and yours could help someone else watching this who is trying to figure out their next step. If you want to keep learning about how to protect your family’s wealth and legacy, make sure you’re subscribed.
Thank you so much for joining me today. I’ll see you next time!
Disclosures
This content is for educational purposes only and is not specific investment advice. Advisory services for Hello Inheritance are offered through Bourke Wealth Management. Please visit www.bourkewealth.com for important investor information.
Bourke Wealth Management is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Bourke Wealth Management and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Bourke Wealth Management unless a client service agreement is in place.
This commentary reflects the personal opinions, viewpoints and analyses of the Bourke Wealth Management employees providing such comments, and should not be regarded as a description of advisory services provided by Bourke Wealth Management or performance returns of any Bourke Wealth Management client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Bourke Wealth Management manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.