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The
Perils of Probate
Probate,
in no uncertain terms, is something every estate owner wants to
avoid at any cost.
Yet
most of us are not sure why. Unless you've been the executor for
someone else's estate, it's a process you won't have to go through...
but your loved ones might have to.
Probate
is a legal process where your named executor goes before a court
and does several things:
- Identifies
and catalogs all of your property
- Appraises
the property, and pays all debts and taxes
- Proves
that your will is valid and legal, and
- Distributes
the property to your heirs as the will instructs.
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Costly
and Time-Consuming |
Probate
is not cheap or quick. Because probate requires a hearing in over-burdened
courts, the process can tie up your property for a year or more.
That means your loved ones will not get the property you intended
for them until the probate process is complete.
In
addition, probate is very expensive. Probate is usually handled
by estate attorneys, who sometimes charge a flat percentage or a
high hourly rate. Their fees and court costs can eat up 2-4% of
your estate's value.
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Not
the Kind of Publicity You Want |
The
courts, by their very nature, do not afford privacy. Everything
that comes before a judge is public record, as is true with your
estate. A will is a very personal document, and may reveal private
family and financial issues and concerns. But once it is entered
into the court record, it becomes public, and can be inspected by
anyone.
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The
Lawyers, Not Your Family, Are the Winners |
Many
lawyers don't explain fully the probate process when preparing your
will, because probate usually represents a nice profit for them
with little effort. To do probate, attorneys often charge as much
as permitted by law, but most of the probate work is actually clerical
and can be accomplished by paralegals and clerks.
On
a $500,000 estate, probate attorney fees could easily reach $20,000,
not including court costs and other expenses. And unfortunately,
you're no longer around to do anything about it.
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Is
Your Estate Liquid? |
Because
probate costs can add up quickly, even before a single distribution
to heirs is made, the estate must pay for these costs. However,
if your estate consists of many illiquid assets, such as real property,
art, coins, or long-term bonds, these assets will have to be sold
to pay for probate.
Selling
these types of items involves appraisal fees and additional delays,
not to mention the fact that property you may have intended for
children may be sold at below-market value to pay for probate.
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Multiple
Probates |
Believe
it or not, some estates must go through more than one probate proceeding.
Probate typically takes place in the city or county where the decedent
lived. However, if the decedent owned property in another state,
that state may also require a separate probate proceeding.
Any
additional probate will be bound by that state's probate laws. It
is at this point that attorney fees and court costs begin skyrocketing.
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Avoid
Probate Altogether |
Certain
states have a threshold an estate's value must cross before going
into probate. For instance, a state may allow you to pass up to
$100,000 of property without going through probate. These thresholds
vary by state to state.
Living
trusts allow you to avoid probate completely. When you set up
a living trust, the trust is considered separate and apart from
you. If you fund a trust, the trust (not
you) owns your property. Therefore, the trust can continue even
when you pass way.
The
probate courts have no jurisdiction over property owned by a living
trust.After your death, property in the trust can be distributed
-- privately and easily -- to family or friends with no probate.
Another
option is to name your heirs as beneficiaries on certain retirement
accounts, life insurance and annuities.
When you name a beneficiary on these types of accounts, the proceeds
from the account are distributed on the owner's death immediately
to the named individual(s). Again, the courts have no jurisdiction
over these types of distributions.
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Avoid
Probate by Gifting |
Another
way to reduce or eliminate probate is by simply giving your money away. Under current tax
law, Uncle Sam allows you to give away up to $13,000 per individual
each year. That means that a couple can give up to $26,000 per
year to each child, grandchild, niece, nephew or friend. Lifetime
gifting reduces your taxable estate, and may place your estate under
the probate threshold for your particular state.
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Order
a FREE Special Report on Probate Today!
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In
no uncertain terms, probate can be an ugly process. To reduce
or eliminate probate, our probate experts can help you review
your options and give you access to affiliated attorneys.
To
receive a FREE Special Report on probate and strategies that
avoid it, click here.
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