Probate refers to the process by which a court legally acknowledges an individual’s death and authorizes administration of their estate. Estate administration involves management of the deceased’s estate, payment of the deceased’s debts, and distribution of his or her assets to a living person entitled to receive those assets.
3 Things for Your Estate Plan
The probate process is timely, expensive, and can cause tension between family members and loved ones. Here are a few specific things to keep in mind as you start to think about your own estate plan:
- There is a tax of 4% of your estate’s total value. No matter what the gross value of your estate is, there is a 4% tax that must be paid in order to begin the probate process. Whether the value of your estate is $5,000 or $500,000, a 4% tax will be placed on that total value that must be paid by your administrator, executor, or heirs/devisees.
- Probate is extremely timely and can be an inconvenience to your family members. Regardless of what the situation is or what the value of your estate is upon your death, the probate process can take anywhere from six months to up to over a year, if not longer. If your estate must go through probate, your loved ones may have to make frequent court appearances, file applications and other estate documents, and pay court fees and bonds. Not only is this be a major burden to place on them, but it can also cause tension between your family members as probate can be expensive, frustrating, and an extremely stressful process.
- You can potentially lose your assets. Because probate is a complex and timely process, there are certain scenarios in which you can lose your assets. For example, let’s say we have a deceased widow with two minor children and a monthly mortgage payment that must be paid in order to keep the house—because both of her children are minors, they cannot legally access her bank accounts in order to get the funds to do so. You can lose a house to foreclosure within just three months of failure to make the mortgage payments, and it will certainly take longer than three months to go through the legal process and gain access to those funds.
These are just a few reasons why it may be in your best interest to create an estate plan that will allow avoid the probate process altogether. Fortunately for you, there are many ways to convert your assets into nonprobate assets that are not subject to the probate process.
Nonprobate assets are those in which, during their lifetime, the deceased entered into a “contractual-type transaction” that becomes effective at their death and controls the distribution of the asset upon their death. In other words, the contract terms define who the new owners of the asset will be upon the deceased’s death; thus, there is no opportunity for dispute over who is entitled to that asset as it is defined right there in the terms of the contract. Examples of nonprobate assets include multi-party bank accounts, mutual funds accounts, and life insurance policies.
Consult an experienced estate planning attorney to ensure that your estate is managed, distributed, and administered according to your wishes. Provide the best future for your loved ones.