What is probate?
Probate is the legal process through which the court sees that, when you die, your debts are paid and your assets are distributed according to your will. If you don’t have a valid will, your assets are distributed according to state law. Probate involves some degree of court involvement, although the level of that involvement will depend upon the size and nature of the estate. Generally, the probate process will entail the collecting of estate assets, paying debts and liabilities of the estate, paying all taxes due and owing, and distributing assets to qualified heirs.
Probate Frequently Asked Questions
What’s so bad about probate?
It can be expensive. Legal fees, executor fees and other costs must be paid before your assets can be fully distributed to your heirs. If you own property in other states, your family could face multiple probates, each one according to the laws in that state. These costs can vary widely; it would be a good idea to find out what they are now.
It takes time, usually nine months to two years, but often longer. During part of this time, assts are usually frozen so an accurate inventory can be taken. If a judicially supervised probate, nothing can be distributed or sold without court and/or executor approval. If your family needs money to live on, they must request a living allowance, which may be denied.
Your family has no privacy. Probate is a public process, so any “interested party” can see what you owned, whom you owed, who will receive your assets and when they will receive them. The process “invites” disgruntled heirs to contest your will and can expose your family to unscrupulous solicitors.
Your family has no control. The court process determines how much it will cost, how long it will take, and what information is made public.
Doesn’t joint Ownership avoid probate?
Not really. Using joint ownership just postpones probate. With most jointly owned assets, when one owner dies, full ownership does transfer to the surviving owner without probate. But if that owner dies without adding a new joint owner, or if both owners die at the same time, the asset must be probated before it can to the heirs.
Watch out for other problems. When you add a co-owner, you lose control. Your chances of being named in a lawsuit and of losing that asset to a creditor are increased. There could be a gift and/or income tax problems. And since a will does not control most jointly owned assets, you could disinherit your family.
With some assets, especially real estate, all owners must sign to sell or refinance. So if a co-owner becomes incapacitated, you could find yourself with a new “co-owner”-the court-even if the incapacitated owner is your spouse.
Why would the court get involved at incapacity?
If you can’t conduct business due to mental or physical incapacity (dementia, stroke, heart attack, etc) only a court appointee can sign for you-even if you have a will. (Remember, a will only goes into effect after you die.)
Once the court gets involved, it usually stays involved until you recover or die and it, not your family, will control how your assets are used to care for you. This public, probate process can be expensive, embarrassing, time consuming and difficult to end. It does not replace probate at death, so your family may have to go through probate court twice!
Does a durable power of attorney prevent this?A durable power of attorney lets you name someone to manage your financial affairs if you are unable to do so. However, many financial institutions will not honor one unless it is on their form. If accepted, it may work too well, giving someone a “blank check” to whatever he/she wants with your assets. It can be very effective when used with a living trust, but risky when used alone.