For most of Americans, part (or all) of the wealth they build will go through probate before it makes it to their loved ones.
What is Probate?
Probate is the legal process that supervises the transfer of assets owned by an individual at their death. If an asset is owned by one individual, and there is no “Pay on Death” (POD) or “Transfer on Death” (TOD) designation, it must go through a court-supervised process to transfer the asset.
Each locality has its own probate court division. The probate clerks oversee the filing of the will, an initial inventory, and subsequent accountings. At each step along the way, there are court and filing fees. Additionally, the will and much of the supporting documentation becomes public record, meaning that anyone can go into the courthouse and request the file.
There is a common misconception that having a will eliminates the need for probate. This is not the case. A will is essentially a letter to the probate court that outlines how assets should be distributed. However, the court still oversees the entire probate process.
Probate is a Lawsuit
In the words of BLG attorney Bryan Bishop, “Probate is the lawsuit you bring against yourself from the grave and pay for with your own money.”
Although it is not common to refer to the probate process as a lawsuit, probate is a court-supervised process that is time intensive and expensive.
Not only does probate decrease the worth of an estate through the court’s fees, but most executors also need an attorney to guide them from start to finish. Probate is an area of the law that has a long history, and many processes that are not intuitive. It is archaic and not designed to move wealth quickly or efficiently.
Both the court’s fees and attorney’s fees end up decreasing the total value of an estate, well before loved ones get the first dollar. Fortunately, there is a relatively simple way to avoid probate entirely.
Avoiding Probate with a Living Trust
While a will is just a letter of instruction to the court outlining how wealth should be distributed, a trust goes a step further. A trust is an “ink and paper person” that can own assets, but does not die. Because only assets owned by a deceased individual are subject to probate, and a trust does not die, assets owned by a trust are not subject to the probate process.
While an individual is alive, they retain full control over the assets in their living trust, even though the trust owns it. They can change their trust, add assets, remove them, etc., but when they pass away, the trust’s assets are distributed according to their instructions without ever having to go to probate.
Even though trusts have a larger price tag up front, the savings in court fees, attorney’s fees, and the time and headache of dealing with oversight more than makes up the price difference for most people and will allow your loved ones to save time and receive wealth more quickly after you pass away.
Avoid probate by getting a living trust. If you have questions, or are ready to take the next step, contact our office.