While we generally prescribe to the strategy of avoiding probate (for a variety of reasons discussed in earlier blog posts) there may be some occasions where probate isn’t such a bad thing. I know, this might sound contradictory, but in some cases it might be OK to use the probate system.
Probate is generally looked at bad for two primary reasons…exposure of your assets (and who gets them) and cost (it involves a judge and the court system). Most feel that if they can avoid probate they can avoid these two negatives. But in some cases, these may not be so negative given a particular situation.
Let’s be clear—there is no one-size-fits-all estate plan or trust that will work for every family. Here’s one that you don’t read all that often—probate is not always a bad thing, according to the Rushville Republican’s article “Probing Into Probate.”
Cost is probably the dominant word that people associate with the word probate. There are costs associated with probate including court fees, personal representative fees, attorney fees, and accounting fees. However, there are also fees associated with creating revocable trusts and trustee fees for administering trusts. The real question people should be asking is if they want to pay these fees now or pay them later?
Time is the other primary reason why people don’t want assets going through probate. While that’s understandable, probate serves an important purpose. During the six to 12 months that it takes for the average estate to go through the process, creditors have a limited amount of time during which they can file any claim against the estate. If there isn’t a probate estate created because trusts were created, it’s possible that assets could be distributed faster than normal. However, a creditor could still make a claim within the legal time period. What would happen if there is a claim made against the estate? If the court deems the claim to be valid, the beneficiaries may have to return some of the assets they received under the trust or the trustee could be responsible for paying the claim.
Privacy is another key component to avoiding probate. If there’s anything you don’t want the public to know about your assets, how they are being distributed, or your last wishes, then you don’t want your estate to go through probate. You will want to structure your estate plan to put all possible assets into other strategies that don’t go through probate.
Emotions can run high in families when estates are being settled. Not everyone always agrees with how the estate is being handled. This can lead to fractures and estrangements of family members. In some cases, families may do better when a judge is making the hard decisions so they don’t have to fight among themselves.
Most people don’t pay federal estate taxes now that the exemption is roughly $11.2 million per person. However, depending on the state you live in, you may still have an inheritance tax, an estate tax, or possibly both.
Whether it’s a good thing to have your estate go through the probate process is a very individual decision and depends on the outcomes you are seeking. If you are in your 50s or older, in poor health, or have a significant amount of assets, you may want to do some probate avoidance planning. An experienced estate planning attorney can help create a plan that will keep your life private, plan for your assets to be distributed according to your wishes, and hopefully keep your family members at peace with each other.