What Is Probate and Why You Should Avoid It at All Costs
Probate is a court-supervised legal process that takes place after someone passes away. It involves validating a will, distributing assets to heirs, and settling debts. While probate ensures an orderly distribution of assets, it comes with significant downsides: lack of privacy, high court and lawyer fees, and extended delays that can tie up assets—including businesses—for months or even years.
If you want to protect your estate, keep your financial affairs private, and ensure your heirs receive their inheritance without unnecessary legal hurdles, avoiding probate should be a top priority.
What Does Probate Entail?
The probate process varies by state, but it generally involves the following steps:
- Filing a Petition – The executor (named in the will) or a court-appointed administrator files a petition with the court to open the case.
- Validating the Will – If there’s a will, the court confirms its authenticity. If there’s no will, the estate is considered intestate, and state laws dictate how assets are distributed.
- Notifying Creditors and Heirs – The executor must inform beneficiaries and creditors.
- Inventorying the Estate – The executor compiles a list of assets, including bank accounts, real estate, investments, and personal property.
- Paying Debts and Taxes – Before distributing assets, the estate must settle outstanding debts, funeral expenses, and taxes.
- Distributing Assets – Once debts are cleared, the remaining assets are distributed according to the will (or state law if there’s no will).
- Closing the Estate – The executor provides a final accounting to the court, and once approved, the estate is officially closed.
This entire process can take anywhere from several months to multiple years, depending on the complexity of the estate and whether disputes arise.
The Hidden Costs of Probate
1. Legal and Court Fees
Probate is not free. The longer it takes, the more it costs. Some of the most significant expenses include:
- Attorney Fees – Lawyers handling probate cases typically charge by the hour or take a percentage of the estate (often between 3% and 7%).
- Court Fees – Filing fees, appraisal fees, and other court-related expenses can add up quickly.
- Executor Fees – Executors are entitled to compensation, which can further diminish the estate’s value.
2. Lack of Privacy
Probate is a public legal process. Once a will enters the process, it becomes a public record, meaning anyone—including creditors, scammers, and distant relatives—can access it. If you value privacy, probate is the last thing you want for your estate.
3. Delays and Family Disputes
The whole process can take months or even years. During this time, heirs may be unable to access funds, and family conflicts often arise, especially if beneficiaries disagree over asset distribution. The longer probate drags on, the higher the emotional and financial toll on your loved ones.
Why Probate is Even Worse for Business Owners
For business owners, probate can be catastrophic. Without a proper estate plan, the court decides how your business assets are handled. This can lead to:
- Frozen Business Operations – It can tie up a business, preventing employees from getting paid or making critical decisions.
- Forced Liquidation – If a court determines that selling the business is the best way to distribute assets, your life’s work could be dismantled.
- Disputes Among Heirs – Without a clear succession plan, heirs may fight over ownership, leading to costly legal battles and potential business failure.
If you own a business, creating a succession plan is essential. Without one, your business could end up in a lengthy dispute, leaving employees, partners, and heirs in financial limbo. To learn more about estate planning for business owners, check out our post “Estate Planning for Business Owners”
How to Avoid Probate
Fortunately, you can take steps to keep your estate out of probate and protect your heirs from unnecessary stress and expenses.
1. Create a Living Trust
A revocable living trust allows you to transfer assets into a trust during your lifetime. Upon your death, these assets pass directly to beneficiaries without going through probate. Benefits include:
- Complete privacy
- Faster distribution of assets
- Protection from court involvement
2. Designate Beneficiaries on Accounts
Many financial accounts allow you to name beneficiaries, ensuring they transfer directly upon your death. These include:
- Retirement accounts (401(k), IRAs
- Life insurance policies
- Payable-on-death (POD) bank accounts
3. Hold Property Jointly
For real estate, holding property as joint tenants with right of survivorship ensures that ownership automatically passes to the surviving owner without probate.
4. Gift Assets During Your Lifetime
By gifting assets before your death, you reduce the size of your estate and minimize probate exposure. The IRS allows tax-free gifts up to a certain limit each year ($18,000 per person in 2024).
5. Establish a Business Succession Plan
If you own a business, you need a legally binding succession plan that:
- Names a successor or outlines a sale strategy
- Specifies how ownership interests transfer
- Prevents the business from going into probate
Final Thoughts: Avoid Probate at all cost
Probate is expensive, time-consuming, and public. Without proper planning, it can diminish your estate’s value, delay asset distribution, and create unnecessary stress for your loved ones. For business owners, it can put an entire company at risk.
By setting up a living trust, designating beneficiaries, and having a succession plan in place, you can protect your assets, maintain privacy, and ensure a smooth transition for your heirs. Taking action now will save your family from legal headaches and financial loss in the future.
One of the the cheapest places I found to set up a trust or even create other legal documents is Law Depot. They have a free trial and some good prices for legal documents. Its always advisable to meet with an estate planning attorney if you have complicated estate planning needs.
To learn more about estate planning, check out our other articles: