Almost all of my non-lawyer friends give me a funny look when I talk about probate. Yes, it is an odd word, but with a short explanation, it makes sense. I find that the basics can be easily explained in one sentence – Probate occurs when someone dies and a court gives someone else (the personal representative or “executor”) the authority to collect the deceased person’s assets, use the assets to pay taxes, expenses, and valid debts and then distribute the remainder, if any. Although the process can be simplified, the potential for complications should inspire all individuals to consider creating (or reviewing) their estate plan.
Going Informal?
If a valid Will with clear instructions for the personal representative exists AND there are enough assets to pay expenses and debts, probate can usually proceed informally. If an estate cannot pay all of the debts or if someone contests the Will, probate is conducted formally which leads to more work for the personal representative and more expenses for the estate. Very few of my clients want their Will to be probated formally and if they do, it is for a very specific reason.
In a formal probate, the court directs which creditors can be paid, the attorneys fees invariably increase, and the personal representative’s duties are more cumbersome. In addition, the formal probate process is no doubt more stressful for surviving family members.
Anyone who has participated in the probate process, either formal or informal, understands the importance of a good estate plan. Individuals who had a simple Will drawn up years ago and do not want to ever see the document again may want to reconsider. Additionally, individuals who think their estate is so small that a plan is unnecessary may find great value in getting a Will. As personal situations and goals change, so should the document that directs how each person’s “stuff” is transferred at death.
Know your assets
The composition of an individual’s estate along with the proper estate planning documents can ensure a smooth probate process. Liquidity to pay off certain debts is a factor that must be considered. If the intent is to transfer assets to a surviving spouse or children, individuals should first calculate their net worth and then determine which assets should go where, and how. This involves a review of life insurance policies, retirement plans, real property ownership, business investments, and bank accounts which are then compared to debts such as a home mortgage, car loans, and credit card debts. A good financial advisor can assist with this process.
Ensuring that the estate has the resources to pay both the expenses associated with the probate process and pay valid claims brought against the estate will increase the likelihood of an informal probate. More importantly, creating clear instructions for distribution will make the process easier for everyone involved. For that reason, a comprehensive estate plan is a key component to an issue-free probate process.
Talk with Advisors
Attorneys, financial planners, and tax advisors all play a role in advising clients through the process of creating a comprehensive estate plan. These professionals will review the value and classification of various assets, explain the tax implications associated with the distribution of certain types of property, outline the probate process, and help clients direct the ultimate disposition of their assets.
The bottom line:
Make probate as seamless as possible and seek out the professionals who can assist with your estate plan today!
