Surely you’ve heard the term “probate”– but for most people it may sound like an alien term. What is it? And why does it seem like people want to avoid it?
PROBATE is, according to Merriam-Webster, the action or process of proving before a competent judicial authority that a document offered for official recognition and registration as the last will and testament of a deceased person is genuine.
If you’re still scratching your head, that’s understandable. In non-lawyer speak, probate is essentially the court-supervised process of gathering the assets of a deceased person and distributing them to whom they belong.
While the probate process varies from state to state, the process is essentially:
-File a request/petition, along with death certificate and/or original will
– Mail and publish notices to local community regarding probate
– Notify all beneficiaries and creditors
– Administer the estate by opening bank accounts with employer ID number created for
the estate from the IRS
– File an inventory of all assets
– Prove that you’ve mailed all notices
– Prove the validity of the will by providing statements from witnesses
– Arrange and prepare income tax returns for the estate
– And more depending on your state
Believe it or not, what is listed above is just a sampling and condensed list of the number of items on the to-do list when your estate is under probate after you pass away.
Other than a long list of requirements, avoiding probate is heavily recommended by many Estate Tax attorneys for a number of reasons, but the top two include cost and time.
Depending on the state and its laws, probate can last anywhere from a few months to a few years. Along with assets being tied up in probate for a matter of years, after a laundry list of fees for executors, attorneys, accounting, appraisal and court fees, it can cost upwards of thousands of dollars.
While many states offer some abridged processes or even exemptions for probate depending on your circumstances, one of the best ways to avoid probate after your death is to create a trust while you are alive.
A living trust is a great way to avoid probate court altogether. Unlike wills, property passes through a living trust outside of probate court. Along with saving time and money, a Revocable Living Trust is the best way to ensure privacy in the matter of your assets being passed down to your relatives or loved ones.
Think of it as a private contract you create with your loved ones. Revocable Living Trusts are popular among those who value privacy and want to avoid draining their assets on fees.
While it is definitely possible to set one up yourself with a one-size-fits-all form online that you can find for free, we highly recommend consulting an Estate Planning attorney to ensure you’ve checked off every requirement for your state.
As more and more people realize the value and importance of estate planning, it’s important to check on your documents – are your plans in order for your family and loved ones should something happen to you? Is your will enough to protect them from a lengthy probate process?
Reference: thebalance.com “The Benefits of a Revocable Living Trust vs. a Will
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