When is Probate Not Necessary?
Probate is the method of distributing the estate of someone who recently died. This process can take several months, even years, before it is completed. It can also be complicated, especially if the estate is large. Heirs and the personal representative responsible for handling the estate may wonder when probate isn’t necessary. If you can avoid probate, it will move the distribution process along faster.
Does a Will Prevent the Need for Probate?
Some people assume that if the deceased person had a will, it means you don’t have to go through probate. The assets would go directly to the people mentioned in the will. While this sounds nice in theory, it’s not the case.
A will has no impact on whether the estate must go through probate. If the assets must be probated, they will need to go through the process regardless of whether the person had a will. However, a will can make the probate process easier and shorter.
Determine If Assets are Probate or Non-probate
One of the first steps after a person is deceased to distribute the estate is to figure out if the assets owned by the decedent are probate assets. If they are non-probate assets, they won’t need to go through the process.
Non-probate assets are those held with other owners or those that have a named beneficiary. Some examples of this type of asset include the following:
- Life insurance policy with a named beneficiary
- Checking or savings accounts in a bank with a payable-on-death or transfer-on-death designation
- Assets owned jointly, such as a home with a surviving co-owner
- Assets in a living trust
In each of these cases, someone is named automatically as the person who will receive the assets after the owner dies. With the assets owned jointly, the surviving owner would automatically become the sole owner. A living trust includes a beneficiary who would receive everything included in the trust. Life insurance policies, retirement accounts, checking accounts and other assets which include a beneficiary automatically roll over to that person when the owner dies. If these accounts don’t have someone listed as a beneficiary, they may need to be probated.
It’s possible in some cases to avoid probate completely if you plan ahead and use these options. It is a good idea to sit down and figure out how to organize your assets to avoid probate for your heirs.
Examples of Probate Assets
Some assets may not be probated, but a majority of them will need to go through probate. Some examples of assets that cannot avoid probate include personal items in a home, such as furniture. Artwork and other collections will need to be probated unless they are in a trust. Vehicles and real estate owned solely by the person and accounts with no listed beneficiary will also be included in probate.
If you discover items in a safety deposit box, they will need to be added to the probate assets. Coins or other special items are also part of probate. A good rule of thumb is that if someone isn’t listed as the direct beneficiary of an asset, it must be added to the probated assets. If you’re in doubt, you can talk to a probate attorney to find out if you should include the asset.
Small Estates May Not Require Probate
If the estate is small, it may not need to go through the full probate process even if there are probate assets. The definition of small will vary by state. For instance, an estate in California is considered to be $166,250 or less. In New York, a small estate is only those under $50,000. It’s important to know the most current laws in your state to determine if your estate qualifies as small.
If the estate meets the value requirement, it may need to meet other restrictions. For example, in New York, the estate can only contain personal property. All estates that have real property must go through the formal probate process unless the real property was owned jointly with another person.
When an estate meets these requirements, it will most likely not need to go through the full probate process. Instead, the executor or personal representative may need to sign an affidavit or complete a simplified probate process.
When an affidavit is used, the person would present it to the entity that has custody of that asset to have it released to the new owner. A prime example is when an affidavit is presented to the bank for any checking or savings accounts of the deceased.
What is Simplified Probate?
If the estate fits under the criteria for a small estate, you can use a simplified probate process. While it’s not the same as a full probate and is generally considered to allow a person to avoid probate, it is still a process to have the assets released to the new owners.
There are usually specific forms to fill out and provide to the court. You generally fill out these forms and file the request for a simplified procedure. You usually need to prove that you paid all debts and any taxes owed to close the estate. This process may also be called summary of probate in some states.
While this simplified process is a version of probate, it goes much quicker and usually doesn’t require an attorney.
Disputes with the Will
To avoid probate, there cannot be any disputes about the estate from other heirs. If someone questions the validity of the will or otherwise disagrees with the terms of the will, the estate must go through the formal process. A court will need to hold a hearing to determine if the dispute is valid and everything else is delayed until a decision is made.
It is important to note that someone has limited reasons to file a dispute. They can’t file one just because they don’t like what the deceased person had in their will. They must be a beneficiary or prove they should be one to file a dispute. Creditors may also file against the estate if they haven’t been paid. However, the executor can dispute the debt as well.
If there aren’t any heirs, the courts will decide what happens to the estate. If there isn’t a will, the estate will most likely need to go through probate before it can be distributed.
Penalties for Not Going Through Probate
Not only is the process of probate complicated, sometimes just determining if an estate needs to go through that process is complex. If you fail to go through probate when it is necessary, you could be hit with a fine or other penalty as the personal representative of the estate. To avoid this problem, it’s important to file the will and a petition for probate or a simplified probate right away after someone dies.
If you’re unsure whether the estate qualifies to avoid probate, you can talk to a probate attorney. They can advise you on your next steps to protect yourself and the assets. While it is beneficial to avoid the time and complexity of probate, you only want to do so if you have a legitimate basis.