Disclaimer: This article is purely informational and is not meant to be legal advice. If you have any questions, please consult a probate attorney.
Coping with loss when a beloved family member passes away isn’t easy. That grief can be harder to bear when you’re the one who needs to sort through, distribute, and dispose of the departed’s earthly possessions as the designated executor.
Before you sell heirlooms or give away the sports car to your nephew Johnny, you’ll need to go through the proper channels and find out: Is probate necessary, or did the decedent use estate planning to avoid it?
If there’s a house involved, it’s almost a guarantee that you’ll have to go through probate. Ignore the rules and a mad beneficiary could lob a lawsuit at you down the road for what the will promised them and they failed to receive, so it’s best to play by the rules. With that in mind, let’s review the possible scenarios that require probate versus those that may allow you to avoid it.
Let’s begin with the basics: What is probate?
According to the American Bar Association, “probate is the formal legal process that gives recognition to a will and appoints the executor or personal representative who will administer the estate and distribute assets to the intended beneficiaries.”
Rob Kittle, a top-selling agent in Fort Collins, Colorado and explains the process in plain terms:
“Probate is when an estate has assets that need to be legally settled and distributed. There’s not always going to be a need for probate. But almost 100% of the time, if there’s real property or real estate involved, it’ll go to probate unless steps have been taken to avoid it.”
Some people mistakenly believe that probate only happens when there’s no heirs, no will, or heirs dispute the existing will. Others believe that every estate requires probate—especially if there is a will.
The truth actually depends both on the state probate laws and what steps your loved one took to avoid probate before they passed away.
Put everything on pause with the house until you’ve figured out probate
If the estate requires probate, then it’s illegal to do anything with the assets—even something as simple as cleaning the house—until you’ve been legally appointed as the executor or personal representative for the estate by the probate court.
That’s why it’s wise to file the will with the probate court as soon as possible, even if you think the estate won’t need to go through probate.
When is probate 100% necessary?
Generally speaking, there are four reasons why an estate is required to go through the probate process:
1. When there is no will.
“If you don’t have a will, your estate will wind up in probate.”
This all-too-common warning is generally true.
No-will estates usually fall under intestate succession laws which can vary from state to state. So, when there is no valid will to name an estate executor, in most states and cases it’ll be necessary for the probate courts to get involved in order to sort out the assets.
However, probate isn’t always required if there’s no will—especially for small estates.
For example, estates in California that are valued at $150,000 or less may qualify for a simplified probate process, or even be eligible to skip it altogether.
In some states, there are even ways for larger estates to qualify for small estate simplifications.
However, in other states like Alabama, Connecticut, and Delaware, estates that include a house cannot qualify for skipping or simplifying probate.
Since a home and it’s current market value can influence whether or not an estate requires probate, it’s wise to consult with an experienced real estate agent with probate experience before starting proceedings through a probate attorney.
2. When there are problems with existing will.
Just because someone’s made out a will doesn’t mean they did it right.
Any number of problems can arise to trigger probate even if there is an existing will that attempted to avoid the process.
It could be something as simple as the decedent failing to notarize the will or attach a self-proving affidavit. Or perhaps the decedent moved and bought a house in a new state without updating their will, so the existing one doesn’t meet the new state’s probate laws.
Or maybe it’s a worst-case scenario where there are multiple wills, or the beneficiaries decide to contest the will.
In any of these scenarios (and others), probate becomes necessary to deal with the problems of an incorrect, invalid, or contested will.
So, if you’re someone’s beneficiary, don’t wait until your loved one passes away when it’s too late to fix any probate-triggering problems that might arise. Sit down with them and their attorney to make sure that the will meets state standards, all the proper steps to avoid probate have been taken, and to learn what you’ll need to do when the time comes to validate the will.
3. When there are no beneficiaries.
Have you ever watched one of those movies where the main character suddenly inherits a house or money from an unknown distant relative?
Well, it may not make for riveting footage, but in order for that to have happened, the estate would’ve had to go through probate.
You see, when a single or widowed homeowner without any surviving children dies, someone has to decide what happens to the house—and that’s typically going to be the probate courts.
True, prior to passing away, that homeowner could draw up a will that appoints an executor and names unrelated friends or charities as the beneficiaries to the profits from the home sale. However, the estate would still likely need to go through probate to sell the house and distribute the assets.
However, if there is no will or it fails to name any beneficiaries, then it’s up to the probate court to decide what happens to the estate. They’ll either locate distant relatives not named in the will to inherit the assets of the estate, or if no relatives can be found, the assets will be appropriated by the state after any remaining mortgage balance and all other debts against the estate have been paid off.
4. When it’s needed to carry out the valid will.
An estate may require probate simply to carry out the terms and distribute the estate—even if there is a valid will.
Sometimes it becomes necessary when the decedent has debts and creditors that must be paid out of the estate before beneficiaries take ownership of the assets.
In other cases, where the decedent retains sole ownership of assets—like the house—probate simply facilitates the necessary legal procedure that transfers ownership of that property to the beneficiary.
When (and how) you can avoid probate
Estates that are small in size and value aren’t the only ones that can skip the probate process—if the decedent makes estate planning arrangements to avoid the painful process before they pass away.
These are the three main ways for estates of any size to avoid probate:
1. With a living trust.
One of the most common and recommended ways to transfer real estate to your beneficiaries without the help of probate court is with a living trust.
A living trust functions much like a will in that it spells out your wishes as to the distribution of your assets. A living trust lets you name yourself as the trustee to manage the trust while you’re still living.
You’re also able to appoint a successor who’ll have the right to manage and distribute the trust as soon as you pass away—without waiting to be appointed as an executor or personal representative by the probate court.
By transferring your real estate into a living trust, your successor trustee can transfer ownership to the beneficiaries without going through the probate court—which means the ownership transfer can take weeks instead of months or years as it might in probate.
Avoiding probate—especially where property is concerned—is the big selling point for a living trust. However, it’s important to note that the American Bar Association says that in most cases a living trust can’t completely avoid probate.
The reasons why and the likelihood of probate still being necessary in a living trust scenario vary by state. So the best way to avoid it if you can is to consult with a probate lawyer before setting up your living trust.
2. When there’s joint tenancy in place.
A living trust isn’t needed when two spouses own a home together in joint tenancy.
“If a couple is holding a property as joint tenants and one spouse passes away, then it avoids probate because they have the rights of survivorship,” explains Kittle. “The surviving tenant of that joint tenancy gets the property so it would not go to probate.”
While joint tenancy is the most common term for this type of property inheritance, it’s not the only one. Some states refer to this or similar arrangements as tenants by entirety, community property, or community property with rights of survivorship.
Not only do different states have varying terms for this type of marital property ownership transfer, even states that use the same terminology have different regulations and requirements for it that may or may not require probate.
For example, in some states you may have a choice between tenancy by entirety or community property with survivorship. So it’s best to consult with an estate planner or probate lawyer to make the right choice for you out of all available options.
3. When your state allows for a beneficiary deed (aka Transfer on Death deed).
“Similar to joint tenancy, if both parents pass away and there’s a beneficiary deed in place, the property would then transfer to their children and avoid probate,” explains Kittle.
The beneficiary deed, also known as the transfer on death deed (TOD), is less common than other steps taken to avoid probate. This is in part because only certain states allow transfer on death deeds.
Instead of being transferred through a process like probate, or a trust, the TOD works just like it sounds—it’s a deed that automatically transfers ownership once the asset owner passes away.
When these deeds are used, it’s often to transfer ownership of financial accounts, however some states do permit them to transfer real estate ownership.
However, even if your state allows TODs for your in-state residence—you may not be able to use a TOD on property located in other states.
When you own property in multiple states you need to make arrangements for transferring ownership for each property based in each state’s probate laws.
If you don’t make arrangements appropriate for each state, your heirs won’t just be facing regular probate—they’ll have to go through ancillary probate in each state.
Will my estate need to go through probate?
Figuring out whether or not an estate you’re inheriting needs to go through the probate process isn’t something to be taken lightly—especially when there’s an asset as sizable as a home involved.
While there’s no simple answer to this question, the good news is that you can take steps to help your heirs avoid it with help from an estate planner, a probate attorney, or an agent with probate experience.
Article Image Source: (Proxima Studio/ Shutterstock)