In this installment of Ask the CFP ®, our question is Why don’t wills avoid probate?
We are frequently asked whether a will is subject to going through probate. There is a common misconception that if you have a will, your estate will not have to go through probate. It’s possible to avoid probate court with proper estate planning, but a will by itself doesn’t avoid probate. On the contrary, it’s used by probate.
When anyone who has a will dies, their will is submitted to probate, which is the process of being reviewed by a local court to determine its authenticity. Probate ensures that creditors are paid and that your assets are distributed to the correct beneficiaries based upon the instructions your will provides to the executor of your estate.
However, if you die without a will, you are considered to have died intestate and the probate courts will distribute your assets based upon your state’s intestacy laws. This is normally something people try to avoid. In fact, due to the time, cost and privacy issues that can exist with probate court, people often try to avoid it altogether by using beneficiary designations or trusts. However, if you only have a will, remember that it’s not meant to avoid probate. It’s meant to be used by probate so the court and your executor may implement your wishes versus your state’s intestacy laws being used.
If you have assets that are only titled in your name with no beneficiary designation, even if you have a trust, they may be subject to probate court. That’s why proper titling and beneficiary designations are important if you want to avoid probate court.
Here are a few reminders of how you might avoid probate court with your assets:
- Assets like life insurance policies, retirement accounts, etc. will pass to the named beneficiary, assuming you don’t name your estate as the beneficiary. It’s important to make sure your beneficiary designations are up-to-date to avoid probate of these assets.
- Co-owned assets with rights of survivorship will pass to the surviving co-owner without having to go through probate.
- Assets titled in the name of a trust can transfer without probate.
- Bank or investment accounts with a Payable on Death (POD) designation or vehicles with a Transfer on Death (TOD) designated also avoid probate and go directly to the individual you have named.
- Not every state allows them, but real estate assets can avoid probate by using a beneficiary deed. It’s generally recorded with the title in the city or county records department.
Probate can take a lot of time, as well as being costly and stressful for your loved ones. We’re here to help if you want to review your overall estate plan to avoid probate.
If you have a suggestion for a future Ask the CFP ® video, please email TFreeman@MonetaGroup.com. Thanks for watching and we’ll see you next month.
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