When Not to Avoid Probate
Volume 8 • Issue 1 • January 2018
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 may not want to avoid it in certain instances. If you are interested in learning more about the ideas and processes discussed in this newsletter, please contact us for an initial consultation.
Often when we speak of probate, it is in the context of avoiding probate. 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. Generally speaking, avoiding probate is a worthwhile planning objective, but occasionally it may make sense to file a probate even if it could otherwise be avoided.
What Happens in Probate?
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 (known as dying intestate), 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, his or her 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.
Why Do I 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, 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.
Why Would I Want to Probate an Estate?
While there are some downsides to probate, it is a tool, and like any tool, there are jobs for which no other tool is an adequate substitute. So when are some of these times you would want to use this tool and initiate a probate? One situation is when you desire to limit the time for creditors to file claims against the decedent. Some states allow you to take this action without a probate if you have a trust, but others do not. If your state does not, limiting the time for filing creditor claims may make sense and a probate is the tool that would allow you to accomplish this action.
A second situation is where the beneficiaries of the trust are different than the intestate beneficiaries of the decedent’s estate. In most states, there is a time limit for probating a will. After this time, the will cannot be probated. A trust plan should include what is referred to as a pour-over will. If an asset is not owned by the decedent’s trust, it may be necessary to probate the will in order to move the asset to the trust. However, if the time limit has passed, the will cannot be probated and the asset will pass to the intestate beneficiaries, not the trust beneficiaries. Therefore, it may make sense to probate the will even if you believe all assets are covered by the trust.
These are just a couple of situations when it may make sense to file a probate, even when one may not be otherwise necessary. There may be others. Whether the benefit obtained justifies the cost of the probate would need to be assessed, but it could be excellent insurance against the possibility of some very unpleasant surprises. At the very least, it is a question on which competent legal advice should be obtained in the course of settling the affairs of the deceased.
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.