The nature of the probate process varies from state to state, and even varies from county to county. However, the nature of the process is the same. A court has to validate a will to ensure that it meets the legal requirements of the state before assets can be distributed, explains the article “Probate workarounds can save heirs time, money” from the Baker City Herald. A typical will in some states can take nine to twelve months, and court shutdowns related to COVID-19 means that the wait could be longer. Probate is also expensive.
When does probate make sense? When a person dies with a lot of debt, probate can be helpful by limiting the amount of time creditors have to make their claims against the estate. If there’s not enough to pay everyone, the probate court makes the decision about how much each creditor gets. Without probate, creditors may surface long after assets have been distributed, and depending upon the amount owed, may sue heirs or the executor.
The court supervision provided by probate can be helpful, if there are any concerns about the instructions in the will not being carried out. However, the will and the details of the estate become public, which is bad not just for privacy reasons. If there are any greedy or litigation-happy family members, they’ll be able to see how assets were distributed. All assets, debts and costs paid by the estate are disclosed, and the court approves each distribution. This much oversight can be protective in some situations.
What’s the alternative? Some states have simplified probate for smaller estates, which can reduce the time and cost of probate. However, it varies by state. In Delaware, it is estates worth no more than $30,000, but in Seattle, small means estates valued at $275,000 or less.
These limits don’t include assets that go directly to heirs, like accounts with beneficiaries or jointly owned assets. Most retirement funds and life insurance policies have named beneficiaries. The same is often true for bank and investment accounts. Just remember not to name your estate as a beneficiary, which defeats the purpose of having a beneficiary.
Are there any other ways to avoid probate? Here’s where trusts come in. Trusts are legal documents that allow you to place your assets into ownership by the trust. A living trust takes effect while you are still alive, and you can be a trustee. Once created, property needs to be transferred into the trust, which requires managing details: changing titles and deeds and account names. This type of trust is revocable, which means you can change it any time. As a trustee, you have complete control over the property. A successor trustee is named to take over, if you die or become incapacitated.
Reference: Baker City Herald (July 16, 2020) “Probate workarounds can save heirs time, money”
Suggested Key Terms: Estate Planning Attorney, Probate, Heirs, Assets, Beneficiaries, Trusts, Revocable, Retirement Funds, Life Insurance Policies