Probate is a word many people have heard of, and of those who have heard it many know they should want to avoid it. But why should you want to avoid probate? And what exactly is probate? Is there a minimum amount of assets that necessitate probate? What about if you have a will, is probate still necessary?
These are all common questions for any estate planning attorney, and we aim to answer them in the following article.
What Does Probate Mean
This is a simple question with a sometimes-confusing answer. Probate is the legal process that occurs after someone (decedent) dies. This legal process is court overseen. It often includes multiple steps, court appearances, and attorneys.
Generally, the steps to probate involve proving in court that the decedent’s will is valid and then identifying and inventorying the decedent’s property – both real property, such as a home, and personal property, such as jewelry or a coin collection. Next, the property will be appraised to determine the value of the estate. Then any outstanding taxes or debts will be paid off. Finally, the remaining property in the decedent’s estate will be distributed either according to their will, if it has proven to be valid, or according to state law if there is no will or if the will has not been proven valid.
This process typically involves substantial amount of paperwork, court appearances, and the involvement of lawyers. The purpose behind probate is to ensure the decedent’s debts are paid and the assets of the decedent’s estate go to the correct beneficiaries. Probate also allows for the legal transfer of the decedent’s estate to their beneficiaries. In this way it serves as a receipt, making it known that the new owner of the property is the legal owner and can sell, or loan, or rent the property.
How Much Does an Estate Have to Be Worth to Go to Probate?
An often-repeated question is, “My estate isn’t worth much, does it still have to go through probate?” Although there are ways to avoid probate, estate size is not one of them. Any estate, regardless of its total value, must go through probate unless some of planning techniques described later are utilized. This said, some states, such as Missouri, have different types of probate based on the total value of the estate.
For example, in Missouri there is probate and small estate probate. The small estate probate is a simplified procedure for small estates valued at $40,000 or less. This simplified process allows an individual to submit a written request for a small estate probate, showing the total value of the estate to be less than $40,000 and taking responsibility for all debts to be paid and distributions to inheritors. Small estate probates are a great option for estates that are less than $40,000 as they are much simpler, faster, and cheaper than a full probate.
In Missouri, a full probate can cost anywhere between 4-10% of the total value of the estate. This gives real incentive to avoid probate all together. Further, a full probate will often take well over 12 months to be completed and require an attorney and court appearances. This is a mentally taxing, time-consuming process, that is not cheap and one of the many reasons to avoid probate court.
Do You Have to Go Through Probate if You Have a Will?
Another often-repeated question is, “I have a will so my estate won’t have to go through probate will it?” Unfortunately, a will is not a probate avoidant tool. Instead, it guarantees probate as the probate judge must determine the will’s validity. The best way to think of a will is as an instruction sheet to the probate judge. It tells them what the decedent’s wishes for their estate are and who it should go to.
Another wrinkle to the will being probated is it must be probated in the county in which the decedent was living in at the time of their death. Often this can cause issues as well. What if the person named in the will to be the executor does not live in the same county as the decedent, or what if they live in another state entirely? This happens often and the probate courts have measures in place to deal with this circumstance, but it still makes the probate process more difficult.
How Do You Avoid Probate Court?
This is an incredibly common question for all estate planners, especially after their clients learn what the probate process requires. There are two great options we will further discuss for avoiding probate. One is creating a revocable living trust. The other option is having a will but utilizing beneficiary designations on all the assets in a person’s estate. Both of these are probate avoidant options.
A revocable living trust will allow a person to transfer their assets into their trust, though a process called funding the trust. Once the assets have been funded to the trust, they are now outside the probate process. This is because they are now governed by the guidelines in the trust and not a will. This allows for your assets that have been funded to the trust to pass through the trust to your beneficiaries without any court interference or probate. This allows for an often simpler and faster process.
The second option for avoiding probate is to utilize beneficiary designations on assets. Many assets such as bank accounts, retirement accounts, investment accounts, and some personal property can have beneficiary designations. Often these beneficiary designations are described as payable-on-death or transfer-on-death. They both have the same end results just different names depending on the asset. A beneficiary designation allows the beneficiary of the asset to provide a death certificate and depending on the type of asset some follow-up information and then title is passed to them. In this way beneficiary designations also avoid probate.
How Can TuckerAllen Help You Avoid Probate?
At TuckerAllen, our experienced estate planning professionals can provide a consultation to help determine how best to avoid probate for your unique situation. With a series of questions, they can determine what the end goals for their clients are and come up with a strategy tailored to achieve those goals.
Get in touch with us if you have any more questions about avoiding probate.