The court procedure known as Probate is used to gather your assets, pay creditors, and pay taxes before distributing your remaining funds to your loved ones when you pass away. Every day, we hear a variety of common misconceptions about the Probate process. Some of the most prevalent are:
• I have a Will, so Probate isn’t necessary
• I don’t have a Will, a Trust or an estate plan, so Probate isn’t necessary
• My total assets are valued at less than the federal estate tax exemption, so Probate isn’t necessary
These ideas are all untrue. Probate-avoidance estate planning is possible, but it should be done in consultation with your legal representative to see which options make the most sense for your particular situation. Understanding the Probate process is fundamental to understanding why the Probate process might want to be avoided.
When a person passes away, their Will (sometimes called the Last Will, Last Will and Testament, or simply Will) is submitted to the Probate Court in the county where they resided. A Will is, in fact, a legal document that guides the Probate Court. It determines who the decedent trusted to carry out their Will (the Personal Representative), it identifies the people the decedent considered their descendants (the Heirs), it names the people or charities the descendant wishes to leave assets to (the Beneficiaries). It sometimes includes special instructions for specific property or people. A Will frequently contains the personal representative’s most basic responsibilities (gather the property, pay the expenses, distribute the assets) and then defers to legally imposed responsibilities found in the statutes and common law of the State where the Will is administered. To learn more, continue reading about the Probate Process.
Why is Probate necessary? Contrary to popular belief, it’s not only for attorneys to make fees. The Probate process provides checks and balances, accountability of all involved, established time frames, and a forum for disputes. The Probate process protects the beneficiaries of estates and any potential creditors and, of course, the taxing authorities.
Imagine that there was no Probate process. Suppose in a current Will; your Aunt Betty left you her entire estate. But what if Aunt Betty dies and your cousin brings a copy of her old Will into the bank naming cousin as the beneficiary, and cousin demands that Aunt’s accounts be distributed to him according to that old Will? How does the bank know that this is Aunt Betty’s last Will? What if your cousin beat you to the bank, and you didn’t realize it? What recourse would you have once the bank distributed to your cousin? The Probate process protects against this exact scenario and many others. If you submit a Will as the Last Will of Aunt Betty to the court, and someone else submits an older Will to the same court, now we have a centralized system that can ensure Aunt Betty’s wishes are carried out. If financial institutions did not have Domiciliary Letters stating authorized individuals to access accounts combined with if the Courts weren’t overseeing financial records, an individual claiming to be the authorized representative of the estate could disburse the estate entirety to various “beneficiaries.” The unauthorized individual may not leave any money for taxes or other expenses of the estate. To understand in greater depth, continue reading about the pros and cons of Probate .
Probate is not avoided by inaction. Absence of a Will does not keep an estate out of Probate; it simply means the State will impose a Will upon you. A court-appointed Personal Representative will handle your affairs, and your estate will pass through the rules of intestate succession.
Directing that accounts pass to a named person or charity through beneficiary designations and pay (or transfer) on death instruments is another way an estate can be distributed without Probate. Caution must be used to ensure that designations are kept current and that enough assets remain in the estate to pay for final expenses and taxes.
Creating and funding a revocable living trust provides multiple benefits, with Probate avoidance being only one. A revocable living trust is a document that creates the rules for holding, transferring, and eventually distributing the holdings of an individual or couple. When properly drafted, a Trust names Trustees (the individual or couple creating the Trust in most cases) who become the title owners of the property. A Trust is “funded” by retitling assets into the name of the Trust. As long as an asset is distributed through a Trust, the goals of the Trustmakers are accomplished without Probate. Unlike a Will, which is only effective after death, a Trust also contains instructions for handling the Trust’s assets during the disability or incompetence of the Trustmakers. It can make distributions to charities or individuals in the proportion and manner the Trustmaker directs. And, unlike matters in Probate, the terms of the Trust, the assets within it, and their distribution are privately handled with no publication or public record created. To circumvent Probate, continue reading about utilizing a trust.
Bob is a Certified Estate Planning Specialist and an Accredited Estate Planner by the National Association of Estate Planners.
Ross Estate Planning, LLC is a client-focused estate planning law firm. Our team is committed to providing assistance and education to improve every client’s experience. It’s driven by a desire to not only assist individuals but also develop and promote our community. It all starts with a conversation. Call Ross Estate Planning at 920-743-9117 today!
An objection to a Will, also known as a “Will contest” is a fairly common occurrence during the probate proceedings and can be incredibly costly to litigate.
In order to contest a Will, one has to have legal “standing” to raise objections. This usually occurs when, for example children are to receive disproportionate shares under the Will, or when distribution schemes change from a prior Will to a later Will. In addition to disputes over the tangible distributions, Will contests can be a quarrel over the person designated to serve as Executor.
Probate is primarily a process through which title is transferred from the name of the deceased to the names of the beneficiaries.
Certain types of assets called “non-probate assets” do not go through probate. These include: