If you’ve read anything about estate planning, you’ve probably heard the term probate, and perhaps have been advised to avoid it at all costs.
Probate is the process in which the court authenticates your will and approves the executor named in your will. The executor is tasked with gathering and safeguarding estate assets, paying estate debts and expenses, and ultimately distributing the assets to the beneficiaries. The executor can’t take any action on behalf of the estate until he or she is officially appointed by the judge. This part is important to note, and we’ll come back to it below.
To begin the proceeding, the executor files the original will with the court, along with a petition, which includes detailed personal information about you, your assets, and your family.
Probate is rarely, if ever, simple or straightforward. The process is notorious for being confusing and fraught with complications, especially for someone who is not familiar with the court rules and procedures. Anyone who’s been through the process following the death of a loved one will warn you of its frustrations.
Setting up an estate plan to avoid probate will save your loved ones time, money, and perhaps most importantly, endless aggravation.
Probate Can Leave Your Loved Ones without the Resources They Need – When They Need Them Most
It’s important to understand that your loved ones will be unable to access any of your assets until they receive an order from the probate court. Depending on your location and what is going on in the world at the time (e.g., a pandemic), it can take anywhere from a few weeks to over a year to receive the court order.
During that time, your mortgage or rent must be paid, tuition must be covered, and childcare expenses must be taken care of. Unless you have people in your life who have several hundred thousand dollars lying around that they don’t mind parting with for a year or two, probate can result in very big problems,
Investments Can Tank
While your executor is waiting for authority from the probate court, any investments you owned at the time of your death are frozen and cannot be sold. This can result in a big loss if the market takes a dive and assets need to be sold at a loss to cover expenses. It can especially present a problem for any investment real estate since rents can’t be deposited and money may be lacking for mortgage payments, property taxes, utilities, and repairs.
Probate Can Increase the Risk of a Will Contest
Your executor must send a copy of the will to your close family members, making it impossible to conceal any negative treatment from them. Those who believe that they did not get their “fair share” have an incentive to file objections to the will, which can significantly delay or even prevent the will from being admitted to court. If there is a will contest, probate can be dragged on for years as the parties litigate the validity of the will.
After the will is admitted, the executor is required to notify creditors and give them seven months to make a claim against the estate. It can be risky for the executor to make distributions to beneficiaries before the seven months are up since the executor would be personally liable for claims that couldn’t be paid because the money was distributed to the beneficiaries.
Documents that are filed with the probate court are public record. Anyone can walk into the courthouse to view and copy the file. In many jurisdictions, you can simply pull it up online. Sensitive financial and familial information is on display for anyone to see – forever.
The executor is required to list the deceased’s financial information on the forms filed with the court. Any person, whether they have an interest in the estate or not, can look up the value of the estate and see what property is inherited by your heirs.
In this era of widespread identity theft and cybercrime, exposure of sensitive family and financial information can put your loved ones at risk.
A lack of privacy can also pose a problem if you plan to disinherit a family member or make unequal gifts between loved ones.
Probate can quickly become very expensive.
It is exceptionally difficult for an executor to navigate probate alone. The executor will likely need to retain an attorney to assist them throughout the process. The legal fees are paid from the estate before any distributions are made to the beneficiaries.
In addition to legal fees, the executor must pay a fee to the court, which is determined by the size of the estate.
If minor children are involved, the court may appoint a guardian ad litem to protect their interests. This is someone, usually an attorney, chosen by the court to inspect the will and other documents submitted by the court and scrutinize any deficiencies. The fee for the guardian’s services must be paid out of your estate.
If anyone objects to the will, litigation will ensue, leading to discovery and depositions, which can quickly result in tens of thousands of legal fees.
Risk of the Court Rejecting Your Will
Courts carefully scrutinize each will that is submitted and can reject a will for the most minor issues: a removed staple, illegible printing, and improper wording are just some of the reasons a court will reject a will.
Some of these issues can be addressed with affidavits (more time and legal fees), but If the court ultimately rejects your will, all of your careful and thoughtful planning will have been for naught. In this case, the court proceeds as if no will had ever been executed and will order the assets to be distributed in accordance with the state default inheritance (intestacy) rules. Likewise, the executor named in your will be disregarded, and the state rules for appointing an administrator will apply.
How to Avoid Probate
The good news is that you can spare your loved ones the agony of dealing with the courts and ensure that your wishes are effectuated by establishing a Living Trust. Trusts are not monitored by the court and remain a private document during your life and upon death. Upon your passing, your trustee will immediately have access to the assets in the trust and can make distributions to the beneficiaries in accordance with the terms of the Trust.
If you’d like to save your loved ones from the aggravation of going through probate with a living trust, contact us to schedule a consultation