What is probate?

If you understand how probate works in your state, you can put estate strategies in place to potentially avoid probate. Your financial advisor can work with you, your attorney and your tax professional to determine what may work best for your situation.

How probate works

Generally, an attorney submits petitions to open the probate estate. In addition, the attorney petitions the court to have the will admitted to probate, if there is one. However, probate is still opened when a client has assets in their name at death even if they do not have a will. This starts the process to:

• Notify beneficiaries and creditors. This is done to ensure that everyone who might have an interest in the estate knows about the court proceedings.
• Formally appoint an executor or personal representative, who is usually named in the will.
• Review and inventory assets and debts.
• Continue management of property and pay any outstanding debts.
• Prepare final tax returns and complete other record keeping.
• Make final distributions to beneficiaries.

It's important to remember that every state and local municipality has different rules and processes for probate. Talk to your attorney to learn more about how probate may look where you live.

Are there any assets that don't need to go through probate?

Some types of property (sometimes called non-probate assets) pass automatically to specific beneficiaries without a court’s involvement. For example, if you name beneficiaries on assets including transfer on death (TOD) accounts, 401(k)s, IRAs, insurance policies and annuities, they won't have to go through probate. The same is true for individual 529 plans when a successor owner has been designated.  This is not the same as the beneficiary of the 529 plan (which is the beneficiary for education expenses to be paid). In addition, assets that are titled in certain ways (like "joint with rights of survivorship") don't need to go through probate, since they pass directly to the other joint owner.

Disadvantages of probate

The probate process is intended to help provide some oversight on how your estate is handled after your death. But with that oversight come some potential disadvantages, including:

• Probate is public – The court proceedings are public record, and in many cases, a notice to creditors is posted through a public medium, like the local newspaper.
• Probate can be costly and time-consuming – Depending on where you live, probate costs can range from 2% to 5% of the estate's value. And because it's a legal proceeding, state law determines how long this process may take – anywhere from a few months to a year or more.

How we can help

No matter what your estate includes, we believe it's important to understand how your assets will be passed down to your heirs. This includes gaining a high-level understanding of the probate process. With your team of legal and tax professionals, your Edward Jones financial advisor can answer questions you have to make informed decisions about your estate strategy.