15 Aug Five Simple Reasons To Avoid Probate
The probate process can be lengthy, intense and sometimes very frustrating. That’s why many financial advisors advise their clients against having their estates go through probate.
While the average American may have experienced a typical court hearing, few have seen or undergone a probate proceeding. Probate is a process by which the will of a decedent is proved and assets distributed according to the will’s term. If no will exists the court then distributes the assets as it deems appropriate.
Some people may think that having a will is enough to avoid probate, but that couldn’t be further from the truth. In fact, a will only serves to make a decedent’s wishes known — and probate is the only way to establish the validity of a will and transfer assets to the rightful beneficiaries.
One of the best ways to avoid probate is to set up a trust. Upon death, a trust can be used to pass on assets to one’s heirs without going through probate. While there are lots of reasons to avoid probate, below are some of the more compelling ones that you should consider:
Probate is expensive
Probate can take a substantial amount of an estate’s value. There are executor fees, attorney fees, court fees, appraiser fees and other expenses. The court can determine attorney fees depending on what the court deems fair — but in some states, attorney fees can be anywhere from 4% to 10% of the estate. It’s quite common for an executor fee to be waived especially if the executor is a beneficiary. Court and appraisal fees can vary depending on the state and the estate size. All these fees can add up quickly especially if the will is contested or if the decedent has assets in other states or overseas.
Probate is a public proceeding
Since the court conducts probate proceedings, anyone can attend the hearings, view court documents or even lay a claim to the assets. The worst part is that in some states probate documents are available online, which means that anyone can obtain your information. This has the potential to attract scammers and unscrupulous people. If you don’t want your financial life to be made public, it makes sense to avoid probate.
Probate is slow
It can take months or even years to finalize probate. If your spouse or children depend on the income from your estate, they will have to find an alternative income source until the probate process is completed. And it gets particularly tough if one of the heirs contest the will. In this case, it may take longer to validate the will, which may put financial pressure on your family.
There are many stories of celebrities and wealthy individuals who spent years in probate court before their heirs received their rightful inheritance. In many states, courts are short of funds and personnel — creating a delay in court proceedings, which means that probate, may take longer to complete depending on where you live.
The court is involved in every decision
From estate appraisal to property sales to attorney fees, the court will be involved in every little detail of the probate process. If you value your privacy and don’t want third-party interference in your private affair when you’re gone, you shouldn’t let your estate go through probate.
Creditors are notified
One of the primary purposes of probate is to make sure that all debts are settled. There will be newspaper ads notifying heirs and creditors about the decedent’s passing. All a creditor has to do is file a claim within the time allowed, and the court will determine if the application is valid. Once the court creditors validate or invalidate all claims – everything will be paid in full – suppose there is enough money to pay – and remaining assets would be distributed to heirs.
In instances where heirs have disagreements — going through probate might be the best for some estates especially if those estates are contested. The finality that courts bring can help resolve disputes once and for all. If you owe a substantial debt to creditors, probate might be the best avenue to settle them, and since there is limited time to file a claim, it can work to your advantage.
With that said, probate can be daunting and emotionally draining. Going through probate can open old wounds and erode trust among heirs. To avoid putting your loved ones in precarious condition when you’re gone, you should avoid probate by setting up a living trust. Though a trust can be more complicated to manage and cost more than a will, it’s worth it. Whatever you do, it’s highly recommended that you seek the advice of a financial advisor.