Why Avoid Probate?
You may have wondered whether it is truly worth the effort to avoid the probate process which settles and distributes property according to the terms of a will. Probate is governed by state laws, and falls under the jurisdiction of probate court in the state the decedent lived in at the time of his or her death. Personal property, as well as real estate which is located in the state of residence, falls under the probate process and is overseen by the court. There are certain non-probate assets which pass outside of a will, including property owned jointly with right of survivorship. This would occur when a husband and wife had a joint bank account and one of them died. In such an instance, all rights to the bank account transfer to the surviving spouse with no need to go through probate. Life insurance and retirement benefits which pass to beneficiaries outside a will are also considered non-probate assets.
Should You Try to Avoid Probate?
Some of the primary disadvantages of probate include the following:
Privacy. When a will is probated, it becomes a matter of public record. The beneficiary information, any potential creditor claims and all asset information is then open to anyone who is interested.
Time is also a significant factor in probate proceedings. Depending on the complexity of the estate, as well as whether there are any disputes associated with the will, the process can take from 7 months to 3 years. If there are beneficiaries of the will who could benefit from having the assets distributed as quickly as possible, probate will definitely prevent that from happening.
In many cases the assets of the decedent may be frozen, even to the surviving spouse during the creditors’ claims period. Some states require a beneficiary who is requesting early distribution of an asset to post a bond.
Probate can be expensive when attorney’ fees, fees for accounting, filing fees, appraisal and business valuation expenses, executors’ fees, bond premiums and other miscellaneous fees are all added into the mix. If litigation is involved, those costs will increase exponentially.
If real estate is owned in another state, or if personal property is registered and titled outside the home state of the decedent, ancillary probate will be required. Ancillary probate is a proceeding similar to the home state probate, but in another state.
The probate process is primarily clerical, and requires a mountain of forms as well as keeping track of crucial deadlines. In some states the probate attorney will make a handful of routine court appearances, in other states the process is completed entirely by mail.
Avoiding Probate through a Living Trust
Most all wills are required to go through the probate process, although in some instances smaller estates are exempt or may be expedited. In fact, one of the primary reasons to consider a living trust is to avoid the probate process. The assets are then transferred to designated beneficiaries at the time of your death by your successor trustee. The living trust is not required to go through probate, meaning a much quicker distribution of assets to heirs—usually in a matter of weeks.
Over the long term, a living trust will likely save your heirs time and money, although the up-front cost is higher than that of drafting a will. The living trust is a more complex legal document, therefore more expensive. If you want to avoid probate as well as garner significant benefits over time, speak to an experienced estate attorney regarding placing your assets in a living trust.