What You Need to Know about “Probate”

I was amazed today when some I know who has been working in an attorney’s office asked me, “If I have a Will, then my estate doesn’t have to be probated, right?”

I guess because I work in this area, I am surprised by how much misinformation people have about probate and Wills in general.

A Last Will and Testament is simply a document which tells the Probate Court how to distribute the property in your estate. It will still be the Court which will have to approve the distribution. Your executor/personal representative (the person you named in your Will to handle the distribution) will have to apply to the Court to be approved and will have to run everything through the Court for approval.

ALL ESTATES are required to be probated. Having said that, not everyone who dies has an “estate.” An estate is property, both real and personal, that is owned by a person at the time of his or her death. Therefore, if you have a bank account titled to you OR your spouse, the bank account is owned solely by you or your spouse when one or the other of you dies. Therefore, the bank account does not constitute any property owned by you which becomes your estate. Similarly, if you have a house which is titled you and your spouse, “as joint tenants with right of survivorship,” when you pass, the house belongs solely to your spouse and again, is not part of your estate. Therefore, let’s say you only had the bank account and the house, both titled the way we said above. When you die, you have no “estate” because you have no property which you own at your death. Therefore, there is nothing to probate, therefore you have avoided probate.

The same mechanism is at play with insurance policies and retirement accounts, which have designated beneficiaries. The monies passed to beneficiaries from these also pass “outside of probate.”

Trusts are also administered outside of probate. That is because a Trust is an entity of its own, a lot like a corporation. The common type of estate planning tool, the Revocable Living Trust, is a Trust that you set up and then you put your assets “into” the Trust. That means that you re-deed your house, re-title your car, and re-title your bank accounts, stock accounts, etc. into the name of the Trust. People are scared of Trusts because they don’t want to lose control of their money and property; however, a Revocable Living Trust is one where you are both the Trustee and the Beneficiary during your lifetime. I tell people it’s like a purse – you can put things into it and you can take things out of it. It is a probate-avoidance tool because when you pass on, a new trustee and a new beneficiary or beneficiaries take your place, and the Trust as you have designated, becomes irrevocable at the time of your death, meaning it cannot be changed. While you are alive, however, you can revoke it, change it, amend it, sell the property in it, buy more property to put into it, just like it is your personal purse. Why is this not an estate? Because you, the Beneficiary/Trustee don’t own the property, the Trust does. So, when you pass, the Trust keeps on going. Thus you, to the extent you have placed all your assets into the Trust, die without assets and don’t have an estate to probate.

For a simple list of estate planning techniques that avoid probate, see this simple article at NerdWallet https://www.nerdwallet.com/blog/finance/5-smart-estate-planning-steps-to-avoid-probate/. The only criticism I have of the article is that it describes Probate as Estate Litigation. Technically it is not litigation because it is a one-sided administration of the estate through the Probate Court – no one is suing anyone else. With that said, the techniques mentioned are valid and easily explained.