While discussing health care reform, living wills, and advanced directives – it is often wondered why such things are necessary. Commonly, the answer is related to using them as planning tools to help one avoid probate, but not many people actually understand what it is that they are trying to avoid.
What is probate exactly?
Basically, probate is the court-supervised legal procedure that determines the effectiveness and validity of a will. Probate can fulfill an important role when it comes to estate planning and the distribution of property after someone’s death, so it is not necessarily a bad thing.
The word probate is often used as a verb to describe the process of settling an estate. In this sense, “probating an estate” is the process by which any assets are documented and their value becomes applied to pay off debts, taxes, and the expenses of administration. Whatever is leftover is then distributed to those designated as beneficiaries in the will.
Probate laws can vary between states. For those that may have a second home, their will would be probated in the state of primary residence. Real estate that is owned in other states must go through probate in those states – unless the property is jointly owned or held in a trust. If it is jointly owned, the property passes immediately to the co-owner(s), so it avoids probate entirely.
The Probate Avoidance Paradigm
There has been a perpetual myth that one should always try to avoid probate. However, in recent years, simplified procedures in several states have reduced or eliminated much of the hassle once associated with probate. Though delays still remain possible due to various state laws, the average estate completes the probate process within six to nine months. Reformed probate procedures in many states may currently allow for one’s spouse, minor children, and disabled children to obtain the money they need for support almost immediately, without waiting for the entire estate to clear probate.
Although it can seem cumbersome, probate does help promise that only those entitled to receive part of the estate do so, even if it takes them a year to get their shares. Probate reduces the time allowed in which creditors can present claims against the estate. While it is a public proceeding, not many regular people are overly concerned about someone going through the estate records. Probate privacy is often touted as a benefit of establishing a living trust, but it is typically only a concern of certain celebrities or prominent wealthy people.
For anyone that plans to avoid probate, or desires to reduce the amount of property that goes through it, working with an attorney can help. Attempting to use a one-size-fits-all computer estate planning program may not take into account all of one’s estate planning needs, providing for the family, or the peculiarities of each individual situation.
Tools of probate avoidance include living trusts, joint tenancy, and life insurance policies. These tools allow for some assets to be distributed outside of the probate process. One cannot simply avoid probate by not having a will. Dying without a will – or intestate – just means that the state will prepare one instead.
Avoiding probate may be a cost and time-saving goal for many, but before making any estate planning decisions, it is best to talk with an attorney so that any decisions made should not be only to avoid probate. Each decision should be part of a complete and thoughtful estate plan.
Property That Avoids Probate
Some property does not need to go through probate such as:
- Money in a pay-on-death account
- Retirement accounts with a named beneficiary
- Property in a trust
- Property that is jointly owned (but not common property)
- Property that has been given away as gifts before death
- Transfer-on-date beneficiary deeds
- Death benefits from insurance policies, the government, employers, and other benefits controlled by contract (unless made payable to the estate)
In summary, estate administration or probate is the process in which a personal representative is appointed by the Probate Court to identify and value the deceased person’s property, pay the debts, and distribute the property to beneficiaries. The probate process involves numerous court forms, filings, and accountings that are often complicated and stressful to complete. Probate also requires the personal representative to meet court deadlines, give required legal notifications, and convey homes and other real property to the heirs and beneficiaries. The length of time needed to complete the probate of an estate depends on the size and complexity of the estate, the local rules, and the schedule of the probate court.
The Floyd Law Firm PC offers tailored probate and estate administration services to help with each step of the way. We work with tax experts and other professionals as needed to ensure that we are able to best serve your specific situation, and we stand ready to assist you with the challenges and demands of the probate process.