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IS PROBATE
REALLY WORTH AVOIDING?
Probate
 The
very utterance of the word evokes images of a slow, costly court process, and,
in the case of large, controversial estates, headlines and appearances on Court
TV. Best-selling books, seminars, and articles have been devoted to ways to
avoid probate, especially through the use of living trusts. But is probate all
that bad for most families? Are the cures sometimes worse than the disease?
Probate
is the legal procedure for validating a will. Once determined, the property
owned by the person who died is distributed to the heirs according to the
provisions of the will (if the will is found invalid or there is no will, the
court will determine the heirs). At one time, probate was extremely slow and
even open to fraud and thievery by lawyers and judges. It can still be costly
and slow in some states, but many have streamlined the process and reduced the
costs. Here is a quick guide for deciding whether or not it's worthwhile to
avoid probate
Consider going through
probate if:
Most of your assets
avoid probate. A large
portion of your estate may not even fall under the control of your will.
Property
that does not pass through probate includes:
Property owned jointly with right of survivorship (such as bank accounts, home,
cars). Typically this would be with
your spouse, children, or business partner.
Property that has a named beneficiary such as life insurance death benefits,
retirement plan benefits, individual
retirement accounts, and annuities.
You have a small, simple
estate. They are most likely to zip through probate, or at
least go through it as fast as through a trust that avoids probate.
Creditors aren't a
problem. Creditors usually must file claims against a
probated estate within six months. No time limits exist for trusts.
You don't expect your
heirs to fight over the estate. Contested
wills can drive up court costs and result in delays.
Alternatives are not
worth the cost. Setting up
and maintaining trusts and other probate-avoiding devices can be more cumbersome
and expensive than court costs, especially if you have a modest estate. In some
states, the maximum filing and court fees are only $1,000 (not counting
attorney's fees) .
Estate taxes are not a
concern. If your estate is valued under $600,000, you won't
pay estate taxes. Some probate-avoiding procedures, such as living trusts, don't
avoid either income or estate taxes, anyway.
Consider avoiding
probate if:
You have a large,
complex estate. Distributing property
owned in more than one state, for example, is complicated under a will. Setting
up trusts may be cheaper in the long run than attorneys fees under probate.
You want to avoid
publicity. Probate records are public, and some wealthy or
public figures may want to avoid the publicity. Estates passed through trusts
generally can be done off the public record, though not in all jurisdictions and
not with all types of property (real estate must be publicly recorded, for
example).
Estate taxes are a
concern. Probate itself has nothing to do with taxes. But
some estate-planning devices that avoid probate, such as specific types of
trusts, can reduce estate taxes.
Your heirs may fight
over your estate. Trusts
aren't foolproof in the case of a fight, but they're generally stronger than
wills.
You want your estate
managed. You may want or need professional management of
your estate after your die. A will won't do that for you.
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