Probate is to be feared! Everyone should bend over backwards to avoid probate! That's what some "experts" tell you. You hear it everywhere and while that may be the "general rule"; does it fit your particular situation?
Revocable living trusts is one strategy. Another is to simply put everything in joint names. There are other strategies, each with it's own pros and cons that must be considered. Joint ownership, for example, can expose your assets to your co-owner's creditors. It can also trigger unwanted tax bills. For example, Lavinia had three children who were always at odds with each other. One child had moved in with Virginia as a caregiver. Virginia wanted her caregiving child to inherit Virginia's home, but Virginia knew the other children would fight about it. So, Virginia put the caregiving child's name on the deed to the home and let the caregiver claim the home as her homestead, too. Virginia made sure that what she wanted to happen would happen, but at a cost. Virginia's property taxes doubled.
If Virginia had instead allowed her estate to go through probate, the probate court process and the judge would have supervised the handling of Virginia's estate to promote fairness and adherence with Virginia's wishes if she had a Last Will and Testament in place when she died.
The probate administrative process is also important when someone dies without a will and for clearing out creditors. Creditors have a specific window period in the probate process during which they must come forward. If they fail to file a claim on time, the window closes and they are forever barred from collecting on the debt.
Those benefits to probate have merit. Let's debunk a few myths about probate which have no merit. First, probate does not increase the tax on your estate. Second, probate is a semi-public process but it is not without privacy. There are steps your attorney can take during your life and during the probate process to ensure privacy for you and your heirs. Third, probate only drags on for years and years when things get complicated or messy. Otherwise, the process can be efficient and expeditious, even for very large estates. Finally, probate is not unreasonably expensive. Judges enforce rules about how much an attorney can charge to probate an estate. Probate expenses include court filing fees, attorney fees and other costs and typically run 2 to 10% of the gross value of the estate. The fee will be a higher percentage for smaller estates and the percentage will decrease as the value of the estate goes up.
Of course, this brief article is no substitute for carefully planning how best to structure your estate. Probate or no probate, before you decide or take action, give us a call to speak with an attorney or consult an experienced financial advisor.
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