REASONS YOU MIGHT WANT TO PLAN TO AVOID PROBATE
Do you want to avoid probate? Did someone tell you that you want to avoid probate? But, you don’t know why? What is the big deal? Why would you want to avoid probate?
(Yes, I am an attorney, but, no, I am not your attorney. Nothing in this post or website creates an attorney-client relationship. Nothing in this site or here in this post is legal advice. The information created here is purely for informational and educational purposes.)
As an estate planning attorney one of the first goals that my clients often identify is to avoid probate.
Maybe you are new to the estate planning game and don’t know what probate is.
WHAT IS PROBATE?
First and foremost, probate is not a four-letter or a dirty word.
Probate is simply the orderly court administration of your assets after you die. What is wrong with collecting, valuing, and ultimately distributing the assets of a person’s estate? That is what you would expect, right?
Regardless of whether you go through probate or not, your assets will need to be located, counted, and distributed. However, the court is not always necessary.
What people really are suggesting that you avoid is having the state/court meddle in your affairs. No one wants the government to dictate what they have to do or where they have to spend their money.
Further, going to court frequently means also needing to hire an attorney. And no one wants to be told to do that!
I won’t go into all of the details of probate in this post, but if you are looking for more information about probate, follow this link.
HOW TO AVOID PROBATE?
Now that I told you that there are people who are suggesting that you avoid probate, but I have also explained that probate is the court orchestrated administration of your affairs, you might be wondering whether you can avoid probate.
Is there even a method where you avoid probate? Well, in short, yes.
There are a number of methods that your attorney might suggest to avoid probate entirely. Some of those might include one or more of the following:
- Small estate – Probate estates, in most states, are only required where your assets exceed a certain amount. Presently, that limit in Indiana is $100,000.00. Therefore, if your assets don’t exceed $100,000.00, then you probably don’t need probate.
- Revocable Trusts
- Irrevocable Trusts
- Family LLCs
RELATED POST: I Have a Trust Why Do I Need a Will?
WHY DO I WANT TO AVOID PROBATE?
Does all that sound complicated and difficult? If you are overwhelmed and considering shutting down, wait a minute.
If you are saying: “All this sounds very complicated; I’ll just stick with a plain old will.” Stop and consider your children, friends, and family.
Remember that completing your estate plan may provide you with a certain level of peace of mind. However, more importantly, having a comprehensive estate plan that also avoids probate relieves a huge weight from your family’s shoulders during a difficult time.
Doing the planning ahead of time rather than just doing the simple thing now, is a good way to bless your family further after you pass away. Find an attorney who will patiently explain your options and help you feel more at ease.
And…if you are still feeling like all the hassle isn’t worth it, let’s consider why you might want to avoid probate.
Why Might I Want to Avoid Probate?
1. PROBATE IS EXPENSIVE
First, probate is expensive.
I will not promise that non-probate transfers will be free or even less expensive than probate, but I guarantee that probate will be expensive.
But why?
Well, in any state where you are required to go through probate, you are required to make some minimum filings.
This means that regardless of the size of your estate, you will have a minimum cost involved for the court.
Then, add the cost of publication, the cost of notices, attorney fees, personal representative fees, cleanout costs, auctioneers, etc., and you might be thousands upon thousands of dollars down the road before anyone has received any gifts.
Further, if you own property in multiple states, you get to pay those probate costs in multiple jurisdictions.
If you have a personal residence in one state but keep a little condo by the beach, you are required to go through probate in both states if you don’t have an estate plan that avoids probate.
This means that you have to pay double (if not more) the costs of probate. A probate in each state. And, some states are far more expensive than other states.
Using a non-probate plan (like a trust or beneficiary planning) will avoid the requirement to have multiple probates entirely. Therefore, you can save your beneficiaries a boat load of cash right out the gate so that they can add a boat to that beautiful little beach condo.
RELATED POST: You Could Buy A Boat: What to do with a windfall.
2. PROBATE IS LENGTHY
Probate has a minimum period of time during which administration has to occur. In Indiana, a probate estate has to be open for at least 3 months. In more cases than not, you can expect to be stuck in probate purgatory for at least 6-9 months.
This means that during that time there is no probate closure, no ultimate distribution of assets, or even any emotional closure.
In some situations this problem is compounded by slow real estate markets.
Think 2008 when you couldn’t give away property.
If you are ready to close an estate but still have to sell mom’s home, you might have to sit and wait. Plus, if your estate is simply dragging out, you are guaranteed to have more attorney or court fees due to additional reportings not to mention the tax returns that the estate will continue to have to file.
You might say, well, I own a lot of property, so this kind of expense and delay is inevitable.
To which I will respond: “NO IT’S NOT!!!”
A good estate planning attorney can help you accomplish the goal of avoiding probate regardless of the size of your estate.
This doesn’t change your tax structure or the size of your gift, it simply shifts the administration of your affairs into a different transfer vehicle to lighten the load on your family.
I have personally watched children transfer millions of dollars of income-producing real estate in a matter of hours simply because the deceased person planned ahead. Those children avoided probate expense, embarrassment, and length.
I have also watch children have to spend tens of thousands of dollars on complicated probate matters simply because the deceased person was unwilling to plan ahead.
One of the big reasons to avoid probate is that it can take a long time.
3. PROBATE IS PUBLIC
Did you know that all court cases, with limited exception, are public record? Anyone at anytime can search court records, request documents, or even sit in on your trials and hearings.
I don’t know about you, but I don’t like my personal finances and familial relationships aired out for the world to enjoy.
Short of living the Kardashian life, I think most of you will agree with me.
Probate is no different. Probate is a court-proceeding. It is court-ordered, court-administered, and court-record. Therefore, the whole world can now read your will, your personal gifts, the inventory of your estate, and even how much you spent on your utility bill during the probate process.
Probate is public.
If instead, you choose a non-probate transfer such as a trust, beneficiary planning, or the myriad of other avenues to avoid probate, then you can keep your personal business to yourself.
No one has to know that one of your children was left out of the will. No one has to know that you kept a secret house on the beach. And, no one has to know how long it took your children to clean out your attic.
Further, no one has to know that your grandchildren just received a large inheritance, that you chose to donate to that charity, or that your didn’t have a dime left to your name.
You might want to avoid probate because it is public.
4. PROBATE IS INFLEXIBLE
Finally, one of the biggest reasons to avoid probate is that it is inflexible. Probate turns your square peg into a round peg, so to speak.
The court doesn’t care whether your family is different, whether your assets, are special, or whether the current market doesn’t lend to probate. Instead, you must follow the same process as every single probate case before and after.
Take special needs children for example (Read more about that in this article about SNTs). Under a probate estate without a will (intestate), the court cannot require that your personal representative set up a supplemental needs trust for your special needs child.
RELATED POST: Estate Planning with Special Needs Children
Therefore, your child may very well lose his or her much-needed benefits/insurance because the probate judge can’t order the formation of an SNT.
Trusts on the other hand can provide for all sorts of other contingencies: minor children, special needs trusts, creditor claims, divorces, bankruptcy, country of domicile, gift taxes… the list goes on.
Make the choice to create an estate plan that is tailored to the particular needs of your family. Further, make the choice to create an estate plan that can react to the then-current needs of your beneficiaries.
If you care about flexibility of estate administration, then you might want to avoid probate.
PROBATE IS NOT A BAD THING, BUT YOU MIGHT WANT TO PLAN TO AVOID IT
Like I said; probate in and of itself is not a bad thing. It is the court-supervised administration of the assets that a person owned at death.
The court requires that a designated individual collect, value, and ultimately distribute the assets that belonged to the deceased person.
However, in many cases, you can easily avoid the “court” part by creating an estate plan that incorporates non-probate transfers.
Why? Because it is:
- Expensive
- Lengthy
- Public
- Inflexible
You might save your beneficiaries a lot of money, time, and embarrassment.
Take the time to meet with an estate planning professional who can tailor a plan that reacts to your personal situation and is more flexible than what you will find in a court room.
Ready to start your estate plan? Fill out this questionnaire to prepare for your estate planning meeting.