If you die owning property, whether substantial or not, the property has to go to someone after your death. You can make your estate plans and make a will specifying whom you want your assets to go to, which may include one or more persons. You can provide details about exactly how you want your estate to be distributed among them. Your estate will also be subject to estate tax if it is above a certain value, which for 2007 is $2m. If it is less than that, it is exempt from estate tax. If you do not will your property (whether real or personal), or make other suitable arrangements, like forming a trust etc., the state will decide what will happen to your property. If you have family or relatives, the applicable laws of inheritance would determine who would get what and how much. In the absence of a family or other valid arrangements made by you, the property will go to the state.
The law mandates that the legal process of probate must be carried out to settle issues like claims, debts, and distribution etc., related to the property of the deceased. When there is a will or some other valid instrument, the settlement is carried out according to the terms contained therein. But if there is no such instrument, the matters are settled through a court appointed administrator.
Probate is a tedious process involving very high costs in lawyers fees etc., and it may take months of court procedures to get it finally disposed. It is also open to contest by anyone who thinks that he/she has a valid interest in the outcome of the will. A probate is filed by the person named as the executor in the will of the deceased. If the property involved in a probate is not very big, the inevitable result is that a negligible amount of the estate becomes available to the beneficiaries at the end of the probate proceedings, the rest going to satisfy the attorney fees and other legal costs. So prudence demands using all means to avoid probate.
There are, in fact, a number of ways in which you can avoid probate proceedings after your death. These are simple and easy, and will greatly benefit your loves ones to enjoy your assets without difficulty after you pass away. First of all, make doubly sure that there are correct beneficiary designations on the documents of your retirement account, life insurance, and annuities because these are not subject to probate and would pass on directly to the named beneficiaries. Get a Pass on death (POD) designation on your bank accounts. Such accounts bypass probate and the designated beneficiary gets the proceeds directly. For stocks, a similar provision, TOD (Transfer on death), enables stock to be transferred directly to the beneficiary on the demise of the stockholder. Consult you banker/broker about these. A review of the titling on your other accounts and assets can allow you to make suitable changes, so that you can acquire a title as joint tenants with right of survivorship with your spouse. Although a joint tenant status may not be an ideal one with a spouse with taxable estate, however, it is an option to be considered.
If you have a large estate, you can form a living revocable trust or family trust and transfer all types of property like your investments, bank accounts, cars and other vehicles, real estate, art, antiques, furniture, jewelry etc., to the trust. The composition of the trust is such that it will not affect your access and control over your assets. It would let you trade and move your assets without restrictions in and out of the trust, and avoid the hassles involved in probate in case of your death.
A will can still be made to provide for appointing guardians for minor children and to take care of other issues that may not be covered by the above. If you have not done anything till now, consult your lawyer and start taking action right away to ensure a hassle free transfer of your wealth and assets in the event of your death.