If you use a will to state your final wishes, your executor would submit it to probate. This is a legal process that takes place under the supervision of a court. To plan your estate effectively, you have to understand this process, and we provide five key facts in this post.
It serves a purpose.
When you poke around on the Internet looking into the process of probate, you will find negative statements made about it. We will cover the drawbacks in some of the other sections, but it does serve some very legitimate purposes.
During probate, the court will examine the will to determine its validity. If anyone wants to come forward to challenge the terms of the document, they would be given an opportunity to do so.
Creditors have the right to receive payment from the estate before it is distributed among the heirs. Probate gives the creditors a chance to come forward seeking satisfaction, and this is only fair.
The probate court provides supervision if someone dies without a last will, and this is an important function. This court also has jurisdiction over guardianship matters.
It is time-consuming.
Now we can move on to some of the drawbacks of probate. The rightful heirs must wait for their inheritances until the estate has been probated and the executor and the court are ready to close the estate. Probate will typically take eight or nine months at minimum, and it can take longer when difficult circumstances exist.
Probate can be costly.
A number of different expenses accumulate during the probate period. These include court filing fees, the executor’s payment, legal fees, accounting charges, and liquidation and appraisal expenses. All these expenditures reduce the value of the estate.
It is a public proceeding.
You probably do not want everyone to know exactly how you decided to distribute inheritances. Probate is a public proceeding so the records are available to anybody who wants to find out the details. This loss of privacy is generally disconcerting, and the information can cause hard feelings among family members.
Probate can be avoided.
If the pitfalls of probate do not sound very appealing, you can proactively take steps to avoid it when you are planning your estate. There are some types of transfers that are simply not subject to probate.
A payable on death account is an account at a bank or brokerage that has a named beneficiary. After the death of the account holder, the beneficiary would assume ownership of the account, and probate would not be a factor.
Life insurance proceeds do not go through probate if you have named a beneficiary, and a transfer of property through joint tenancy with right of survivorship is probate-free.
Another strategy for avoiding probate is to use a revocable living trust as the centerpiece of your estate plan. You keep control because you can act as the trustee and the beneficiary while you are alive.
You name successors to assume these roles after you pass away, and you would leave instructions with regard to the way you want the assets to be distributed. After your death, the trustee would be empowered to pass along inheritances, and the probate court would not be involved.
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