The Benefits of Avoiding Probate

July 14, 2023
Probate court can help ensure a fair distribution of your assets, but it can be time-consuming and could compromise your family's privacy. Here's what you should know.

Probate court, a specialized court that helps distribute property and debts of a person who has died, might appear to have a straightforward mission: validate a person's will and make sure the deceased's creditors are paid and that remaining assets are distributed to the proper beneficiaries.

But it's often not that simple. While probate can help ensure money, property, and other assets end up in the right hands, it can also be time-consuming, slow, and uncomfortably public.

Fortunately, there are ways to avoid probate and lay the groundwork to make sure the "settling up" after you pass on is a civil and relatively efficient process for your loved ones, says Austin Jarvis, director of estate, trust, and high-net-worth tax at the Schwab Center for Financial Research.

The downsides of probate

Probate courts in the U.S. handle hundreds of thousands of cases every year, but that doesn't mean you should join the crowd. For one, your time is precious, and so is your family's.

"In a probate case, you show the court a will and then proceed to prove its veracity. In some states, this process is made easier with the use of a valid 'self-proving' affidavit," Austin says. (A self-proving affidavit is a signed and notarized statement confirming that you and your will's witnesses were the individuals who signed and witnessed the original will, and it keeps witnesses from having to testify about your will's validity later.) "That's just one of many steps. Typically, the probate process could last three months to a year. And if you've got a substantial estate—say, $5 million or more—probate court could take up to five years."

Costs to go through probate court vary by state, but typically are based on a percentage of your assets, which could range from 0.5% to 4% in high-probate-cost states. For example, a $1 million estate may cost $40,000 just to settle, not including fees charged by attorneys, accountants, executors, and appraisers.

Probate can also lead to legal headaches and family disputes. There can be challenges to the validity of the will, which is an entire process unto itself. And in probate, how the burden of proof is determined for these situations depends on the state. "That can get tricky, especially when it involves new spouses, stepchildren, and others," Austin says. "Probate judges are very matter-of-fact. They follow the letter of law to a 'T' to make sure they're calling the 'balls and strikes' of a will and are seldom, if ever, moved by sob stories."

Bottom line, says Austin: "There are a lot of complexities with probate law." Notably, for the privacy-minded: probate proceedings and wills are a matter of public record. If there's information about your estate or finances that you'd rather not be made public, you should consider some alternatives.

How your Schwab Wealth Advisor can help

Your Wealth Advisor can connect you to estate planning specialists who can help you explore your options and weigh the benefits and drawbacks of different estate-planning approaches.

Your Wealth Advisor can connect you to estate planning specialists who can help you explore your options and weigh the benefits and drawbacks of different estate-planning approaches.

Alternatives to probate

Can you avoid probate? Having a solid estate plan that includes a trust is a good place to start.

While there are many types of trusts, the most common is a revocable living trust, which lets you to transfer assets into the trust while naming yourself the trustee. You have the same access and control over your assets as before you established the trust, and can buy, sell, trade, and move assets in and out of the trust. When you die or become incapacitated, the trust will become irrevocable—meaning after that point it can't be changed or revoked. 

A revocable trust is a very "flexible and powerful" tool that can allow your family faster access to assets and is generally harder to challenge than a will, Austin says. "With a revocable trust, it can be a relatively quick process—days to weeks, depending on how fast the trustee moves to transfer the assets to the beneficiaries," he says.

Additionally, trusts keep private matters private. There's a cost to setting up a trust—administrative fees, for example—but it's often worth it for families that seek a faster, more discreet method of settling an estate.

The gift of peace of mind

"Having foundational documents that take care of your assets is akin to gifting peace of mind to your loved ones,” says Austin. “It's truly a kindness to your heirs and beneficiaries if you can relieve them of the stress of dealing with your estate."

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The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

This information does not constitute and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.

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