In response to questions we receive on a recurring basis, Taft’s Private Client group is initiating a series of answers to frequently asked questions. The following law update is the first in the series. We will continue to inform you of new rules and important deadlines as they arise.
What is probate?
Property that passes under your will is subject to probate. Probate is the process of obtaining probate court approval to pass property as your will dictates, or, if you don’t have a will, under your state’s law of descent and distribution. This includes filing the will, appointing an executor (called a "personal representative" in many states), obtaining appraisals, making an inventory of assets and accounting for distributions from the estate.
A nearly universal misunderstanding of wills and probate is that all property is controlled by the will and that all property has to pass through probate. Neither is true, as we explain below.
Another common misconception is that “avoiding probate” means avoiding estate taxes. Estate taxes are determined under tax law.
It is typically a good idea to avoid probate because of potential costs and delays. Loss of privacy is also a concern, as wills and probate proceedings are public records. Privacy concerns may be especially important where probate records are online.
Does any of my property pass outside probate?
Yes. It is very common for clients to have significant assets that do not pass under their wills, so those assets do not pass through “probate.” What kind of property passes under a will and what kind of property does not? In general, only assets titled in your name alone pass through probate. This includes homes and bank and brokerage accounts titled solely in your own name. By contrast, any asset held jointly with right of survivorship passes outside probate to the surviving owner. Life insurance, IRAs and retirement plan assets pass outside probate according to your beneficiary designation. Likewise, accounts with a "TOD" or "POD" designation ("transfer on death" or "payable on death") bypass probate and pass directly to the designated beneficiary. Many estate plans fail to work as the client intended because they did not complete or update their beneficiary forms, mistakenly believing that property passes under their will.