Probate is the compulsory legal process when a person dies. It inventories your assets, ensures that all your debts are settled and distributes the rest to the heirs designated in your will.
If you didn't leave a will, however, each state has its own rules defining who is entitled to receive your property, and how much. This "intestate" probate process can be lengthy, during which time your heirs have nothing - sometimes, not even access to your life insurance proceeds. Most states have minimum periods that creditors are allowed to respond, during which your estate can't be distributed.
Probate is also costly. There are attorney's fees, executor's fees, court filing fees and other costs. Many states set these fees as a percentage of the value of your estate. Others allow attorneys to charge an hourly fee, subject to court approval of its "reasonableness." That can spell big trouble if the probate judge is a golfing buddy of your parents' attorney.
Do You Need a Will?
You've probably heard that musician Prince recently died intestate. Many people are incredulous that he neglected to draw up a will, especially since the bulk of his estate is publishing rights to his music, valued at around $300 million.
Prince's reluctance probably had something to do with his almost irrational dislike of contracts - even a will, which is basically a contract with your future deceased self. But Prince was part of the 55% of Americans who die without a will.
In some cases, that makes economic sense. If you have little to leave behind, a will could cost more than probate would. If you have no instructions for your remains or messages to deliver to your heirs - another role of a will - then maybe you can do without.
On the other hand, anyone smart enough to sign up probably needs a will. That's because it's not just the size of your estate that matters... it's also what's in it that's critical.
If you have more than a bank account, a home and a few personal possessions, a will is critical to ensure some control over how those assets are handled after you're gone. For example, if you own a business and your heirs can't agree on whether to keep it running or cash it in, a probate judge may order it sold so it can be divided according to state law.