Advantages and Disadvantages of Probate
The advantages to the probate process can include times when there is a significant risk of creditors with a claim to your estate threatening litigation because there is a ready made court procedure for resolving claims faster than a traditional lawsuit. If there's a chance someone may challenge your estate plan in court, probate can be the most efficient way to resolve any conflict.
If the value of the property transferred is relatively low and because of the hefty fees and time consuming nature of the probate system (typically a year or more), sometimes it's best to try and avoid probate for some estates. The major disadvantages include costs, time and the risk that your estate is not kept private.
Assets Subject to Probate Estate
Probate property is property that will be transferred by the provisions of your will. Non-probate property is property that is either jointly held and passes by right of survivorship, directed by beneficiary designation, such as an Individual Retirement Account (IRA) or a life insurance policy, or passes according to the terms of a trust. If you die without a will, your probate property will be distributed to your heirs and the probate court will appoint an administrator to oversee the distribution of your property.
Essentially, all assets owned by you in your own name, not in joint tenancy, in trust or with a beneficiary designation, are subject to probate administration when you die.
Probate Avoidance Strategies
Because of the cost and time to probate an estate, a number of probate avoidance strategies and advantages are available and listed below:
· Retirement accounts with a beneficiary designation – easy to do and keep up-to-date
· Annuities – easy to do and keep up-to-date
· Life insurance – a good way to provide quick cash to beneficiaries and the proceeds do not go through probate
· POD (payable on death account) – very easy to create and no additional costs
· TOD (transfer on death account) – easy to create
· Revocable living trust – complete control over property while alive
· JWTROS and tenancy by the entirety (for married couples) – generally simplest probate avoidance to create
Ancillary Probate Administration
Ancillary probate is when you own real property in multiple states. This process is in addition to the primary probate process that takes place in your home state. Obviously one major drawback to ancillary probate is the additional costs incurred by probating in more than one estate.
In addition, because each state has different intestacy laws, if someone were to die it is possible that the heirs of the estate could be different than that of the primary probate proceeding.
Sample Questions 1 - 4
RetirementThree estate planning secrets every advisor and saver needs to know.
Financial AdvisorA look at wills versus living trusts and when to choose one over the other.
Financial AdvisorTrusts and wills are both means to pass on wealth to heirs. Which of these is likely to serve your needs better if you have considerable wealth?
InvestingThis arrangement allows beneficiaries to access your account without having to go to court.
Financial AdvisorConsider your own retirement needs when deciding whether to leave an inheritance.
Financial AdvisorWhen done properly, estate planning ensures that your beneficiaries receive your assets in a way that is controlled by you. Here is how to do it right.
Managing WealthIf you don’t plan your estate, your surviving family may have to deal with disputes and probate that were avoidable.
RetirementIt's important to give serious consideration to your IRA beneficiary designations.