Probate is the state-supervised legal process that validates a will, resolves creditor claims, and distributes the remaining assets under court oversight. It has three primary disadvantages:
Probate typically takes nine to eighteen months, assuming no contests or backlogs. During this time, the decedent’s assets are frozen and unavailable to heirs.
Legal, executor, and court fees can consume 3% to 8% of the estate’s gross value, and significantly more if the will is contested.
Probate is a matter of public record. The will, the inventory of assets, their valuations, and the names of the heirs are accessible to the public.
To bypass probate, you can use the following strategies:
Hold property jointly with rights of survivorship or tenancy by the entirety. While this avoids probate, it exposes the assets to the joint owner’s creditors and can trigger unintended gift tax liabilities and loss of a step-up in basis.
Establish transfer-on-death (TOD) or payable-on-death (POD) instructions for accounts.
Transfer assets into a revocable living trust during your lifetime. The trust owns the assets, removing them from the probate estate while keeping them under your control.
Refer to IRS Pub. 559 for IRS guidelines on executors and survivors.