Floridians are continuously warned about probate. Make sure your family never has to deal with probate court! It’s expensive! It’s inconvenient!
Is all this just hype? Or is probate really a problem? Should you build probate avoidance into your estate plan?
As with most things, there is no one right answer for everyone. Determining whether to build probate avoidance into your estate plan will rest on your specific family and financial circumstances. That said, there are real downsides to probate. But before discussing them, let’s step back and define probate, a process often misunderstood.
Put most simply, probate is the court-supervised process by which your assets are transferred to your beneficiaries, and your creditors are paid, after you pass away. Many people think probate is only for estates that are large enough to be taxable, but that’s not so. Taxation and probate are separate issues. Another myth is that having a will keeps an estate out of probate. That too is false.
- Time: Some estates sail through probate in months. Others take far longer because of complications related to selling real estate, taxes, creditor claims, etc. We have handled probate cases that could not be closed for well over a year because of such circumstances, leaving beneficiaries waiting on their inheritances. When the subject comes up during the public seminars our firm conducts, attendees often share their own experiences with long, nightmarish probates.
- Lack of privacy: Probate is a public process. You may be uncomfortable knowing that anyone who is so inclined can examine your will and your dispositions to beneficiaries. Also, the public nature of the process makes it easier for any disgruntled heir to gather ammunition to launch a lawsuit against your estate. Lastly, the lack of privacy can provide a rich source of information for scam artists.
- Expense: Most probate proceedings require hiring a lawyer, so probate will incur legal fees. (This undercuts the cynics who claim lawyers promote living trusts as an alternative to wills because they are a “moneymaker.” The initial fees to set up a living trust are indeed greater than setting up a will, but the truth is, many lawyers make more money probating an estate than planning for probate avoidance with a living trust.) Your estate will also incur court filing and other administrative costs – all money that will be siphoned away from your loved ones. And while it’s true that there are usually legal fees associated with administering a trust post-mortem, those fees tend to be significantly less because probate court requirements are not a factor.
Under certain circumstances, an upside
Some people may have logical reasons to want their estate to go through probate. For example, a client may not want to do the work of switching assets into a living trust. If a client lacks complete confidence in the individual(s) being considered as personal representative, the client may actually prefer court supervision. Also, the nature and extent of the client’s assets may simply not justify the initial expense of establishing a trust.
Bottom line, probate avoidance makes good sense for most people – but it is by no means a hard and fast rule. There can be mitigating issues. Talk to your estate planning attorney to select the estate plan that’s right for you and your family. There is only one set rule to follow: What is best for you and your loved ones.