What is probate, and should I avoid it?

Probate is the court-supervised process for paying your debts and transferring your property after you die. It’s designed to ensure everyone gets what they’re entitled to. A judge appoints your personal representative (a.k.a. executor) to administer your estate while the court supervises. But there are a couple of very important things to know about probate:

  1. Probate is the default process for transferring property, but it’s not the only way. Anything with a beneficiary designation—life insurance and retirement accounts, most commonly—will not go through probate. Instead, the beneficiary files a claim with the financial company and is paid directly.
  2. A will does not avoid probate; a will provides your instructions for probate. This means it only applies to property going through probate. Your will can’t control what happens to your life insurance or retirement account.

Probate isn’t a bad thing, but many people try to avoid it because they want to make their final affairs as simple, cheap, and quick as possible for their families. Here are the pros and cons:

Pro: Settles all claims and cuts off liability forever.

Con: Takes 6-9 months, usually; distributions happen no sooner than 3 months, usually.

Pro: Judge can settle disputes.

Con: Easy for someone to bring up a dispute; everyone gets notice.

Pro: Estate planning for probate is easier, simpler, and cheaper.

Con: Probate includes a 0.2% of the net estate filing fee, a 2.0% of the net estate fee for the personal representative, and attorney fees. All these costs can easily end up being $5,000-15,000 or more.

Pro: A court supervises and ensures the job is done correctly.

Con: Probate sometimes requires ancillary proceedings in other courts if you own property in multiple jurisdictions.

The bottom line: If you want your beneficiaries to get paid faster than 3-9 months, avoid disputes, reduce fees, or make your estate administration simpler, then you might want to plan to avoid probate.