What is Probate and Why Should You Avoid It?

Probate is the legal procedure (lawsuit) through which a deceased person’s assets are distributed under court supervision. Probate is usually a time-consuming and costly process for your loved ones after your passing. While probate serves an important purpose, it can often be avoided with proper planning.

The probate process starts by either obtaining waivers from all relevant family members or serving them with a formal court notice. Giving them notice in the beginning of the case can really awaken some feelings and set off some challenges.

Probate court will often require an Executor/Administrator to carry a bond, an insurance policy against them stealing the assets. If the Executor/Administrator has bad credit or weak employment history, this can often prevent them from being appointed to do the work. And even if they can get “bonded,” it typically costs several thousands of dollars that are paid from the assets in the estate.

Then the Executor must disclose all the deceased person’s assets that need to be resolved in probate, something you probably prefer to keep private. Once all the assets are disclosed, then the Executor/Administrator generally has to ask the court’s permission before distributing assets. These steps may also trigger additional notices and hearings, easy opportunities for estranged family and friends to show up and complain to the judge, which can stop the process. Finally, your Executor/Administrator has to request the court’s approval that everything was done right, and to be discharged from their duties.

If there is a house to be sold, the Executor/Administrator may have to ask the court’s permission to hire a real estate agent, list a house for sale with an asking price, and once offers are in, to proceed upon the terms of a specific contract. This can be extremely cumbersome and time-consuming, which then costs additional mortgage interest, property taxes, insurance premiums. The listing agent will likely disclose this in the listing, which can discourage some buyers.

If you only have a will, it is still likely that your estate is going to probate court. Often, your Executor will not be able to perform their duties without the “Letters of Authority,” the first court order from a probate case.

Designating beneficiaries on accounts such as life insurance policies, retirement accounts, and payable-on-death bank accounts can help avoid probate. These designations ensure that the assets pass directly to the named individuals upon your death. But it’s important to know each account’s policies, and to keep the beneficiaries current. A death, or other unintended consequence, whether it be taxes, creditors, someone’s ex-spouse, or a number of other scenarios, make it all to easy to wind up in probate court.

A well-drafted estate plan is one of the most effective tools to bypass probate. By utilizing strategies such as creating a revocable living trust, you can ensure that your assets are transferred directly to your beneficiaries without the need for court involvement, even in a changing environment. Assets held in a trust are not subject to probate, allowing for a smoother and more private transfer of property. They also help avoid court intervention if a beneficiary wants to avoid some tax consequences on their end, or bypass through them to their children or others.

While our experienced probate attorneys are ready to navigate the challenges of probate, even they agree that a well-prepared estate plan is the better way to serve our clients.

Attorney Tom Schmitt