- While going through probate may appear daunting and overwhelming, with proper guidance, the process can be quite easy.
- There are common positives to go through probate, such as a shorter period during which a creditor can make a claim on a deceased person’s estate.
- Avoiding probate can help provide privacy to a deceased person’s estate and provide simplicity when real property is owned in multiple states.
To many people the word probate has a negative connotation. Due to the fact that many people only experience the probate process one or two times during their entire lifetime (if that!) it is viewed as confusing, expensive, and undesirable. Many hire an attorney to guide them through the process and if done correctly, one can avoid the horror stories of a probate that lasts months or years. In this article, we hope to clarify the probate process and help explain when it can be a positive.
In its simplest terms, probate is a legal process that occurs after someone dies. The probate process includes the following:
- Formal recognition within a court that a person is deceased
- Identifying a deceased person’s last will
- Inventorying a deceased person’s assets/liabilities (with proper appraisals, if needed)
- Paying debts and taxes
- Distributing remaining property
Since many of these administrative tasks will need to be completed when a person passes away irrespective of their ability to avoid probate, an ‘avoid probate at all cost’ mentality may not be entirely warranted. At times, planning to go through probate may even be desired in some cases. Generally, going through probate shortens the period of time within which a deceased person’s creditors may seek recovery of a debt. In Kentucky, the probate rules shorten this period of time from two years to six months. As a result, in most cases, a deceased person’s family can more quickly and confidently distribute his or her estate by proceeding with probate.
While the probate process may be less daunting than generally recognized, there are certainly reasons to try to avoid probate in several cases. Some people choose to avoid probate by establishing and funding revocable living trusts, but, as a general rule, jointly-owned assets, transfer on death accounts, and accounts/assets which pass by beneficiary designation (e.g., IRAs) also bypass probate.
Many people may try to avoid probate for one or a combination of the common reasons below:
Privacy. The terms of a person’s will and the assets included in his or her estate are made public as part of the probate process. Many people want to avoid this, and avoiding probate with as many assets as possible provides the person and his or her family with privacy.
Avoiding Probate in Multiple States. If going through the probate process is perceived as bad, going through the probate process in multiple states at one time is much worse. If a person owns real estate in a state in which he or she is not a resident at the time of his or her death, the family will have to go through the probate process in the person’s state of residence and the state in which the real property is located. To reduce this concern, many people who own real estate outside their state of residence will elect to own out-of-state real estate in a revocable trust or an LLC.
Trust Planning Implemented for Non-Probate Avoidance Reasons. If a person has established a revocable trust in order to implement trust planning at his or her death (for tax or asset protection reasons), utilizing that revocable trust by funding it during the person’s lifetime and attempting to avoid probate with respect to many, if not all, of the assets at the person’s death can be prudent planning.
One common misconception in today’s world is about the benefits of a revocable or living trust. While these lifetime trusts offer many benefits, these types of trusts do not provide protection from claims of a spouse or creditor. Additionally, it does not enable a person to qualify for Medicaid. If one is not seeking other planning goals and one has a rather simple estate, it may be easier and cheaper to go through probate rather than establishing a revocable/living trust.
In conclusion, while the probate process may appear daunting and overwhelming, the decision to affirmatively plan to avoid probate should be made only after considering your specific circumstances and the potential positive and negative aspects of probate. We always encourage our clients to bring us into these conversations to help review, implement, and monitor an estate plan while working with a trusted estate planning attorney. If you feel that it would be beneficial to review your current estate plan or establish a new estate plan, please do not hesitate to call our office.