What is Probate?
Before I dig into the details of what a proper estate plan looks like and each document involved in a complete estate plan, I thought I would share about probate. Probate is the division of the court that handles the distribution of one’s assets after they pass away. Essentially, the probate court makes sure that the heirs receive their share as well as make sure any creditor of the deceased can come forward to get paid out of their estate. The process generally consists of filing for a new estate that includes the will, if there was one, as well as what assets are going through probate and who the heirs and relatives are. Prior to completing the probate process, a full statement of accounting will be filed that show the court what has occurred with the property while in probate. Finally, after the probate process is complete, the assets can be distributed.
One of the most common questions I get is “Why do I want to avoid probate?” Probate is both expensive and time-consuming. When it is all said and done most probate estates will cost several thousand dollars. This includes filing fees, court costs, publication fees, and at times services costs. Additionally, in Missouri, attorneys fees are percentage based. The fees average out to be between 2 and 3 percent of the total value of the estate. That number may seem small, but take a fairly common estate that includes: life insurance $300,000; residence $250,000; vehicle $25,000; household goods $15,000; bank accounts $20,000; retirement accounts: $200,000. The attorneys fees for this estate be more than $20,000. That is a lot of cash that is not going to be distributed to your heirs. Generally, the probate process can take as short as 45 days or as long as several years. The average estate typically lasts about 9 to 12 months. The time that it takes going through probate is time that your heirs do not have these funds or your property.
One of my top goals as an estate planning attorney is to advise my clients on how to avoid probate. There are several key actions that must be done in order to avoid probate. The two major ways we avoid probate are through the formation of a trust and through beneficiary designations. A trust will automatically avoid probate so long as all of the estate is placed into the trust. Additionally, using beneficiary designations, like TODs, PODs, and beneficiary deeds, the property with the beneficiary will avoid probate.
A final reason to avoid probate is to help prevent some family fighting. Probate tends to lead to more family fighting as the assets sit in probate. Families fight over who has control, what they do with the assets, how much property is sold for amongst other things. By avoiding probate, families tend to get their inheritance quicker and have less anxiety about what is occurring in probate and who is in charge of the property.
By taking the right steps in getting a proper and complete estate plan, you can avoid probate to save your family and your heirs time, money, and stress.