RISK 4

Probate Risk

Do you think your clients can name off all of their financial assets and their values? How about the beneficiaries for each of those assets?
Many people have a potpourri of financial assets, and it can be confusing to keep track of them. If it’s hard for the clients, it’s likely to be hard for the beneficiaries.

The first step to managing the complexity of your client’s financial holdings is to create a will. A will allows your client to control how and to whom assets are distributed, and can be used to suggest a guardian for the care of children or other dependents. Without a will in place, state inheritance laws could determine how your client’s property is distributed, and even who should care for the children. However, even with a will, assets may not always transfer immediately to beneficiaries. There are many circumstances that can impede the process – the most common being probate court.

Probate is a court process where a judge will decide the validity of a will. This process can take anywhere from a few weeks to a few years depending on the complexity of the will, and whether potential beneficiaries contest the validity of the will. Also, generally any assets titled solely in the deceased’s name (not jointly held) and don’t have a beneficiary designation will go through probate.

Probate Exemptions


There are some financial assets that are exempt from the probate process, ensuring that funds get to the beneficiaries more quickly. Life insurance, by its very nature, has a clear beneficiary designation and passes to that beneficiary outside of the probate process. Retirement accounts such as 401(k), IRA, and pensions may also have beneficiary designations. Jointly held assets generally bypass the probate process.

Key Point

Structuring your client’s assets to minimize the number of items and total dollar value that will need to go through the probate process can save time and hassle for the executor of the will.