Probate is a legal process that can enter the picture when assets are being transferred after someone passes away.
When a will is used to facilitate asset transfers, the executor that is named in the document would admit the will to probate, and the Surrogate’s Court would supervise the administration of the estate. This court will also preside when someone passes away without a will or a trust.
You should certainly understand some things about the process when you are making your estate planning decisions, and we will share four key facts about it in this post.
Probate is time-consuming.
If you are like most people, you would like your loved ones to receive their inheritances as soon as possible. When an estate passes through probate, the inheritors have to play a waiting game.
At minimum, it will take about nine months for probate to run its course, and complicated cases can take longer. No inheritances are distributed while the estate is being probated, and this arrangement is less than ideal from a time perspective.
There are costs involved.
Probate is not free by any stretch of the imagination. The executor is entitled to remuneration, and they will often bring in a tax accountant and a probate lawyer. There is a filing fee, and in many cases, there are liquidation and appraisal charges.
Along the way, the executor will incur incidental expenses, and final taxes must be paid during probate. These expenditures reduce the inheritances that will eventually be received by the heirs to the estate.
Privacy is lost.
Probate records are available to anyone that is interested, so there is a rather disturbing loss of privacy.
In addition to the general intrusion, this information can cause hard feelings among people that were close to you, and the acrimony can linger and cause problems for a long time.
Probate can be avoided.
If you don’t like what you are learning about probate, you do not have to use a will to state your final wishes. You can proactively implement a probate avoidance strategy that will revolve around the utilization of a revocable living trust.
As the name would indicate, you retain the right revocation when you have this type of trust. You can change your mind and take back direct personal possession of the assets at any time.
This being stated, you actually have total control while the trust is active, because you would act as the trustee. In the trust declaration, you name a successor trustee to assume the role after your passing, and they could be empowered to step in if you become incapacitated as an elder.
With regard to the trustee selection, any adult that is willing to assume the role can technically act as the trustee, and this would include someone that is a beneficiary. You could alternately use a professional fiduciary like a trust company or the trust department of a bank.
After your passing, the trustee would distribute assets to the beneficiaries in accordance with your wishes, and probate would not be a factor.
There are some types of asset transfers that are not subject to probate. If you open a payable on death account at a bank or a brokerage, you would name a beneficiary. The assets would be transferred to the beneficiary after your passing outside of probate.
Property that is held in joint tenancy is transferred to the surviving joint tenant, and probate is not a factor. The transfer of an individual retirement account to the beneficiary would be a probate-free transfer, and this also applies to life insurance proceeds.
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