Understanding probate proceedings can help you understand why the process is necessary in some cases and why you should avoid it in others.
Probate: Purpose and Process
Probate is a judicial process that is used to establish the value of a person’s estate once they have passed away, as well as to determine beneficiaries of that estate. This process happens when no will, trust, or other measure was put in place before the person’s death. During the probate process, the following steps are taken:
- Determination of estate value and establishment of beneficiaries. This is done in conjunction with an authentication of the decedent’s last will and testament in order to ensure that all documents are legally sound and binding.
- Declaration of an executor in charge of distribution of the estate. In many cases, the elected executor must post bond before receiving the relevant paperwork for his or her duties. In this case, posting bond refers to a deposit, which is paid as an act of faith on the part of the executor – and to prove the legitimacy of his intent. This is to ensure that the executor has a financial investment in the case and is less likely to defraud or otherwise damage the estate and its beneficiaries. Some instances do not require this, while others do, especially in those states where this part of the probate process is required by law.
- Location of assets, determination of value, and notification of creditors. Once a person is deceased, his or her assets must be rounded up for appraisal so that they can be accurately divided between beneficiaries. Before this distribution can occur, however, creditors must be notified and given a chance to collect any final debts against the deceased person. Once those debts are paid, the estate can finally be divided.
- Legal transfer of the estate to previously determined beneficiaries. As part of the distribution process, tax returns are prepared to indicate the amount awarded to each beneficiary.
What Probate Really Costs
The process of probate is a long and often arduous one. Even in uncontested probate, which isthe best circumstance, the process can take anywhere from 10 to 18 months or more. Not a dime will be seen from the payout of the estate until well after the process has ended, and all of that time in court can amount to some hefty legal fees.
Probate is also a public proceeding, therefore all information relevant to the case is accessible to the public. If there are private matters that a person or their family doesn’t want to share with the entire community, probate is certainly not a preferable situation.
Lastly, probate requires the notification of creditors that a person has died and has an estate that has become available for distribution. This means that any outstanding debts can be seized by these creditors, leaving beneficiaries who are truly entitled to those assets out in the proverbial cold.
How to Avoid the Probate Process
The best way to avoid probate is to establish a will with detailed beneficiary designations or to make other legally binding arrangements for what will happen concerning your estate after your death, such as a revocable living trust. Living trustsare “living” becausethey are created while a person is alive, andthey are “revocable” because they are able tobe changedas circumstances or desires change. They are created specifically to direct assets and the estate of the deceased in the event of one’s passing. These arrangements will ensure that your will is done after your death, and that those you leave behind will have fair access to the benefits of your estate.
At Peak American Financial, our job is to ensure that your assets are properly registered to avoid probate, as well as to ensure the accuracy of that registration. We prevent common mistakes, clerical errors, omissions, and institutional changes. In doing so, we help you and your love ones make the best of estate planning and distribution.
For more information on how we can help you, contact us today.