Sometimes I think “probate” is a four letter word. Many people are more concerned about avoiding probate than avoiding the IRS. Yet, many people do not understand what probate is.
Probate is the court-supervised process of transferring assets from one generation to the next. Under strict laws and deadlines, a judge requires the executor to gather your assets, pay your creditors, file your last tax return, and then distribute the assets. If you leave a Last Will and Testament, then the judge generally directs that the assets be divided as you instructed. Think of a Last Will as legally-enforceable instructions to the judge about where you want your belongings to go. If you do not leave a Last Will, then state law provides that your assets are to be distributed to your next-of-kin.
As a court process, there are fees and costs involved in a probate. There is a court filing fee (between $200 and $600 per statute). There may be attorney’s fees, and your executor is entitled to a percentage of the assets probated as compensation for all of his or her hard work. As a rough estimate, approximately 5% to 10% of the value of the assets will be used to pay for court fees, costs, and compensation.
Additionally, there are certain timelines involved. The shortest probate, called a set aside, can be completed in a few short weeks – perhaps six to eight weeks. However, the longer probates (for estate valued at over $200,000) will take a minimum of six months and could stretch longer, depending upon the issues present. It is not uncommon for a full probate to take a year or more. In the course of the court proceedings, your next-of-kin and loved ones must all receive certain legal notices and pleadings; sometimes that requires publishing the notice in the newspaper.
Probate can seem overwhelming, tedious, and expensive. However, the law provides for a plodding process specifically designed to avoid error, gather all your assets, pay all your debts, and ensure that all of your loved ones knows what is going on. Many of my clients are concerned about avoiding probate, but there are instances where probate is preferred: namely, when you know your next-of-kin will need the supervision of a judge to carry out your wishes.
Often, probate is an unnecessary expense that simply draws out the process on your loved ones. Proper planning – through a fully funded trust or other mechanism, like the use of pay-on-death designations – can avoid the need for probate all together. Proper planning can reduce the time it takes to pass your property to your loved ones from months, to weeks, and lower the costs at the same time.