What is Probate and Why Do I Want to Avoid it?

THE COUNSELOR

Volume 5 • Issue 4 • April 2015

The Counselor is a monthly newsletter of Hallock & Hallock dedicated to providing useful information on estate planning, business succession planning and charitable planning issues. In this month’s issue, we will look at the probate process and why people want to avoid it. If you are interested in learning more about the ideas and processes discussed in this newsletter please contact us for an initial consultation.


In any questioning of individuals about their estate planning goals, it will not take long to get to the goal of avoiding probate. But, what is probate and why does everyone want to avoid it? Specifically, “probate” is the act of proving that a written instrument purporting to be a person’s will was executed in accordance with legal requirements and proving its validity. More generally, it refers to the process of settling an estate of a deceased individual. In some jurisdictions there are special courts, known as probate courts; that have responsibility for the settlement of a deceased person’s (referred to as a decedent) estate.

What Happens in Probate?

If a probate is required, the first issue to address is where to file the probate action. Generally, the probate will be filed in the county a person resided in at the time of death. But, it can also be in any county where property of the individual is located. Sometimes, for example if a person owned land in two or more states, multiple probates will be required. This is because the court in one state has no power to address property located in another state.

Depending on the state, the process can be more or less difficult. Many states allow what is known as an informal probate. In an informal probate there is often no formal appearance in the courtroom, rather everything is handled through the court clerk unless a problem arises.

If there is a will, the will must be validated and the person nominated in the will is generally named as the personal representative. If there is no will, the court will determine who is in charge of administering the estate. Once a personal representative or administrator has been appointed to take charge of the estate, their first job is to secure the assets of the decedent. Once the assets are secured, an inventory of assets is created. Creditors are also notified about the person’s death and their right to make claims on the estate. Once all the creditors are known and paid along with costs of administration, the estate is then distributed to the individuals entitled to the same by law or by the will. At that point the estate is closed. This process can take anywhere from several months to several years depending upon the complexity of the estate.

Does Everything I Own Go Through Probate?

The short answer is no. Only property held in your individual name will require probate. Here is a list of some assets that may not require a probate:

  • Property held subject to a right of survivorship such as joint tenancy property or community property with right of survivorship.

  • Death benefits from insurance policies with a properly designated beneficiary.

  • Assets in a pay-on-death (POD) or transfer-on-death (TOD) account.

  • Retirement accounts with a properly designated beneficiary.

  • Property held in a trust.

Additionally, some states allow the transfer of property by affidavit if the estate meets the definition of a small estate. However, even if you meet this definition, a probate may still be required to transfer real property.

Doesn't My Will Avoid Probate?

Again the answer is no. Many people think that they can avoid probate if they have a will. If a valid will exists, then the will determines who receives the estate and who is in charge, but a probate is still required. If a will does not exist this is known as intestacy. When a person (a testator) fails to make a will or if the will fails they die intestate. In the case of an intestate estate, the laws of the state where the property is located will determine who is in charge of the estate and who receives the property.

Why Do People Want to Avoid Probate?

There are many reasons why people want to avoid probate. Here are several:

  • Cost – depending on the state, probate can be quite expensive. However, even if you live in a state where the costs are more reasonable there are still attorney fees and other costs that will be necessary regardless of the size and complexity of the estate. While some costs will exist regardless of whether or not there is a probate, there are many costs that can be avoided.

  • Privacy – probate proceedings are public proceeding, meaning your wishes will become part of the public record available to all who wish to see.

  • Property in multiple states – if you own property in multiple states some form of a proceeding will be necessary in each state. This will add to the cost of the probate.

  • Time – probate takes time. For some period of time those administering and benefiting from your estate will be limited in their ability to access and control property. This may mean that the sale of a property is lost or business decisions can’t be made.

Conclusion

This has been a brief overview of the probate process. If you want to avoid probate, make sure where allowed you have completed proper beneficiary designations. Also, consider creating a fully funded revocable living trust to hold assets.


This Newsletter is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.