When forming an estate plan, everyone hopes to avoid unnecessary complications for their executor, family and heirs. One thing many people worry about is probate.
Most estates undergo the probate process, but there are numerous misconceptions about how it actually works.
Myth 1: Only estates without a will go to probate
Having a will makes things easier, but it is not a way to bypass probate. During probate, the court confirms the existence and validity of your will, identifies any outstanding debts and transfers property to your heirs and beneficiaries.
Myth 2: A trust is necessary to avoid probate
It is true that placing funds in a trust enables the beneficiary to receive them without waiting for them to clear probate. There are additional circumstances in which assets can avoid probate, including:
- Joint tenancy: If you own property jointly with another person, such as your spouse, then the property transfers to the other person upon your death.
- Naming a beneficiary: Assets with a named beneficiary, such as a life insurance policy, can go directly to that person without going through probate court.
- Transfer-on-death deed: Also called a beneficiary deed, a transfer-on-death deed allows ownership of real estate to transfer to your beneficiary upon your death.
Myth 3: Taxes and fees will consume most of your estate
There are costs associated with probate, including attorney and executor fees, appraisal and court filing fees. However, most fees are proportional to the value of your estate.
California does not have an estate tax. Federal estate tax applies but is only a concern for very large estates. As of 2022, the estate tax exemption limit is $12.06 million.
Understanding the facts about probate court and estate planning can save you and your loved ones a great deal of stress and legal complications.