When is Probate Required? Tips to Keep in Mind

When is probate required?

When a person dies, their belongings must be distributed among the living – in most cases, at least. It’s rare for someone to take something to the grave with them, in the style of the ancient Egyptians. And legally, the dead cannot own anything. However, how do you determine who gets what, especially when there’s a dearth of documentation on the decedent’s official final wishes? And how do you determine who is an eligible heir, and who isn’t? That’s largely what probate law is concerned with, and that is the domain of the probate court. 

Individual states and counties have their own probate courts, where estates are evaluated and distributed in accordance with local laws. Each state has its own rules, but the process largely works the same throughout the US: a relative or lawyer petitions the local courts to start the probate process, a representative is chosen, the estate is evaluated on paper and in person, all relevant beneficiaries and potential creditors are notified, and all final debts and obligations are settled before the remainder of the estate is distributed among surviving and eligible heirs. 

However, the probate process can take a while, and hit any number of snags that might prolong the paperwork and red tape involved. As such, a good portion of estate planning is dedicated to minimizing, or even altogether avoiding probate, by ensuring that every asset is already accounted for after death. 

Understanding Probate

The long and short of it is this: if there’s a provision for an asset to be distributed upon death, then it does not have to go through probate. If an asset is left in need of an owner, then it does go through probate. 

As an example, an individual retirement account with a named beneficiary will have its remainder transferred into that beneficiary’s accounts upon the original account holder’s death. As such, that IRA won’t be going through probate. Your grandfather’s Porsche, however, may need to go through probate if doesn’t have a designated beneficiary on a transfer-upon-death deed, even if it’s already accounted for in the will. That being said, there are ways your grandfather could have kept that Porsche out of the probate process, and we will go over each of them. 

In addition to determining who gets what, the probate process is also needed to legitimize the will. Even a notarized will must be presented and officially accepted by the court before it can be executed under the probate process. Furthermore, probate courts are also meant to facilitate and resolve family conflicts with regards to the contents and legitimacy of a will. If there are disputes and disagreements as to who gets what, probate court is where these matters are settled once and for all. 

When Probate is Typically Required

Probate is needed whenever an asset must be distributed among the living without a specific deed, ownership document, or provision that transfers that asset upon death. 

The most common scenario for a lengthy probate process is a large estate with no coherent estate plan whatsoever, at which point a designated representative must organize, manage, and resolve the estate’s debts before distributing it in accordance with local intestacy laws. 

These are laws that determine the ratio in which an estate is divided and distributed among the next of kin, and these ratios (as well as the priority order for the next of kin) may differ from state to state. 

When a will is present, the will becomes the framework for how the estate should be distributed. Assets not listed within the will must be distributed as per local laws, however. 

Furthermore, probate can be lengthened by jurisdictional issues or missing legal requirements, as well as complex assets, such as foreign holdings or business interests tangled up in a complicated business structure. For assets registered and owned in different states, for example, the designated representative will have to petition ancillary probate processes in these states to process and transfer the asset over to the family. 

Exceptions to Probate Requirements

Not all cases require probate. Local courts are busy, and they don’t always have the time to pour over the details of every asset that every decedent ever owned. As such, people with a total estate value under a certain threshold may often opt for an expedited or simplified probate process, which is much, much less involved than full probate. 

In California, for example, the thresholds for a small estate affidavit (which allows someone to petition for a simplified probate process) include $95,325 for the net value of the estate, $184,500 for the gross value of all real and personal property in California, and $18,450 of any salaries or compensation owed to the decedent, as of April 2022. 

Aside from simplified probate processes, certain assets are usually not subject to probate, or may bypass probate. These include:

• Assets with designated beneficiaries (payable-on-death and transfer-on-death accounts and assets)
• Assets owned jointly
• Assets owned with rights of survivorship
• Assets managed and held in a trust agreement

Tips to Minimize Probate

You can work to minimize your probate process through a simple estate plan. Assigning designated beneficiaries to all assets and accounts that are eligible to be transferred through a death deed can exempt them from the probate process. 

Minimizing the size of your estate by taking advantage of your annual and lifetime gift tax exemption limits allows you to cut down on the size of your estate before death. Owning assets jointly with a spouse or loved one may transfer liability to them, but depending on how the ownership is structured, they may become full owners after your death. 

Last but not least, trusts can be an invaluable tool to flexibly manage and distribute your assets after death, on you terms, rather than a state-specific probate plan. 

When is Probate Required Conclusion

No matter how you intend to manage your estate, it is important to periodically revisit and revise your estate plans. An estate plan is only as useful as it is relevant, and your plans may no longer reflect your wishes in a few years’ time. Revisiting and revising an estate plan every five years, or after every major life event, allows you to ensure that your estate plans are always up to date.