My clients frequently claim that their number one goal in establishing an estate plan is to “avoid probate.” Upon further discussion, I discover that most have a number of misconceptions regarding what probate actually is.
Probate is, quite simply, the legal process by which assets owned by a decedent are transferred to the rightful beneficiaries. Whether or not an estate is subject to probate has nothing to do with whether the decedent had a Will. Generally speaking, if you die a Minnesota resident with more than $50,000 in assets in your name, your estate is subject to probate.
The probate process begins with the appointment of a Personal Representative. Once appointed, the Personal Representative has the duty to collect the assets of the estate and to distribute them to the beneficiaries. If a decedent has a Will, the Personal Representative and the beneficiaries are determined according to the Will. If a decedent does not have a Will, then both are determined based upon state law.
“Probate” doesn’t mean that an estate will be subject to excess taxes, nor does it mean that the estate is guaranteed to be tied up in Court for months. Many states, Minnesota included, provide for informal and unsupervised probate proceedings that provide the Personal Representative with an incredible amount of flexibility and discretion in administering the estate.
There are certainly ways to avoid probate. Clients can place all of their assets in joint tenancy, or use beneficiary designations on all of their accounts. However, such solutions do not allow as much flexibility in the event a beneficiary predeceases the account owner, particularly if the contingent beneficiaries are minors. Alternatively, some clients choose to avoid probate by transferring all of their assets to a revocable trust. If fully funded, a revocable trust is an effective way to avoid probate, but often the cost of establishing and funding a trust exceeds the costs saved by avoiding probate. For more details on revocable trusts, also know as “living trusts”, see Jayne Sykora’s post here. I generally recommend revocable trusts only for clients whose concerns go beyond simply “avoiding probate.”
Given all of the above, be sure to contact a local estate planning attorney to discuss your needs and wishes – and whether it is worth the the expense and time to avoid probate.
Photo by: s_falkow