My Loved One’s Assets Are Going To Probate, Now What?

If you’ve perused the internet for estate planning articles, you’ve likely come across the term “probate.” Chances are, it probably wasn’t painted in the most flattering light.

Probate court has cultivated a somewhat negative reputation over the years. But when a loved one passes away, that may be where their assets end up. If that’s the case, try not to panic, and don’t believe everything you read online regarding the probate process. 

Here’s what we believe you need to know about this legal system and how it impacts your loved one’s assets.

What Is Probate?

Probate is a legal process used to “validate” your estate. It’s an administrative process dividing your assets as legally required and distributing them to the appropriate parties. 

For example, the probate court may evaluate your will and create a process to implement your final wishes as written. They will legally recognize your chosen executor, guardians, trustees, and heirs.

Probate court can also help remove loved ones’ names from property if needed. This situation can be common if the deceased hasn’t named beneficiaries, assigned joint ownership, or instructed that certain assets be payable to a trust. If that’s the case, the estate must go to probate to legally change ownership.

3 Probate Myths To Unlearn

There are several misconceptions about the probate process. While many families wish to structure their estate to minimize court involvement, a loved one’s estate may need to go through probate. Here’s what you need to know if that happens.

Myth #1: Will’s Must Always Go Through Probate

Yes, in most cases, your will must go through probate. But there are occasions where your estate can bypass probate, even when you have a will. 

Let’s look at an example. 

Remember, you have several estate planning tools at your disposal to help you carry out your wishes—a trust, beneficiary designations, joint ownership, etc. When applied appropriately, these tools may avoid probate. 

If you leverage tools like establishing beneficiaries on retirement accounts and insurance policies and making your executor a joint owner on bank accounts, your estate may not need to go through probate even if you have a will. 

In a case like this, the will’s primary function is to reconfirm your wishes that other tools, like beneficiary designations, help carry out. 

Myth #2: Probate Drags On For Years and Years

It’s a common misconception that the probate process always takes a long time to complete. But the only mandated delay is the period creditors have to file claims, which varies by state. 

Once that period ends, it’s up to the state’s executor to pay all debts, taxes, and gather assets for distribution. In many cases, people complete the probate process in under a year.

However, there are times when probate drags on. But this primarily occurs when family members challenge the will, if the estate is extensive and exceeds the federal estate tax exemption limit, or if the estate continues to receive income after a person’s passing (such as royalties or licensing agreements).

Myth #3: Probate Creates Contention

Going through probate doesn’t automatically mean you’ll go through a worst-case scenario. Too often, people think that the state will seize their assets, take the house, drain their bank accounts, or cause familial disagreements. 

But the probate process isn’t out to get you. It’s simply one way to execute an administrative process for assets after someone passes. 

Think about it this way. Your loved one could have a 1,000-page trust to avoid probate. Yet, the presence of that document doesn’t mean family members still won’t fight over who gets what. If there’s tension regarding a loved one’s estate, it doesn’t matter what legal process it goes through—family riffs can occur no matter what.

An effective way to diffuse tension amongst family members is by being honest and transparent during the estate planning process. Doing so can help family members understand and talk through the reasoning behind their decisions and give others time to process.

However, Probate Court Could Introduce Certain Inefficiencies

All of this is not to say that probate can’t be a pain. It can create some inefficiencies, involve the court, and incur unnecessary costs and delays.

Because the process tends to be paperwork heavy, it’s often on the executor, surviving family members, and legal team to provide all necessary documents and pay the fee to open everything up. After an initial 30- to 60-day process, expect probate to take between six months and a year.

In most cases, as soon as probate is open, you can start liquidating assets. You can’t, however, begin making distributions.

Here’s an example:

Say your loved one dies, and you want to sell the family house. You put it on the market and settle on an attractive offer. You then contact the estate planning attorney with the offer in hand. If there are no underlying issues, you can likely sell the house. However, you won’t be able to make distributions until you close probate, which, again, could take about a year.

Why Your Will Plays a Bigger Role Than You Might Think

While a will may not be your or your loved one’s only estate planning tool, it can play an important part in the wealth transfer process. A will indicates who is in charge of the estate and dependents after a person’s passing. You can use it to name an executor, guardian, trustee, and other essential roles.

Without a will, it’s up to the courts to decide how to distribute your estate based on local law. While this may work out fine in some cases, it doesn’t guarantee that the outcome will reflect your original intent. 

Your will lets everyone know and understand your intent for your estate.

If you have a question about your loved one’s will or the probate process, don’t hesitate to reach out. We’d be happy to connect you with an estate planning attorney who can help you create a personalized wealth transfer plan. 

Disclaimer:

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.