The Dreaded Probate Process

Neal A. Deutsch, CFP^®

Published in Rivertown Journal, March 2006

Many people hear the word probate and immediately think of negative connotations. However, the decision to purposely avoid probate has become more complex in recent years due to the establishment of a Uniform Probate Code and there are many factors, some positive and some negative, to consider when deciding whether to structure your estate to entirely avoid probate.

Probate has come to mean the entire court process by which the state supervises the orderly distribution of a decedent’s probate property. Many people choose to avoid the drawbacks of probate through the use of joint tenancy or a living trust. Let’s look at some of the advantages and disadvantages of the probate process.

One benefit of probate is court supervision, which can promote fairness through the process. Judges and official clerks are called upon to approve major estate activities and distributions. Probate also allows for an orderly administration of assets (important for the large number of people who die without a will, known as “dying intestate”) and greater protection from creditors. Probate procedures typically require creditors to formally file their claims against probate assets within a certain period of time, from the (state dependent) date of issuance of Letters Testamentary. Failure to timely file a creditor’s claim can forever bar collection from those assets.

There are several drawbacks to probate that must be carefully considered. First, probate can be a complex process requiring petitions, accountings, hearings, and other complicated legal procedures. Most people do not understand their purpose or their procedural steps, and find themselves hiring specialists to meet their requirements. The cost of legal supervision under probate can be high, ranging between about 2% and 10% of gross estate assets. These expenses include personal representatives’ fees and attorneys’ fees. However contrary to popular belief, probate does not increase estate taxes.

Next, as most of us have heard, probate entails a lack of privacy. Probate is a public process and all probate proceedings are subject to public scrutiny. This is a major concern for many people who wish to keep their affairs private. Be it known that once you are gone and your estate is probated, your former next-door neighbor can go to the local courthouse and learn of all of your assets. Lastly, even for smaller estates, probate administration takes considerable time, ranging from a short few months in the case of a relatively simple estate to several years if there are challenges or obstacles, before final distribution is made. However, you should know that there has been a trend in recent years for states to use the Uniform Probate Code (UPC). If you live in a state using the UPC, your probate costs and time delays may be significantly reduced.

Various trust documents may be employed to by-pass the probate process, providing a quicker and most private way for the decedents assets to be distributed in accordance with their wishes. The titling of accounts (single, joint tenants, tenants in common) will add to the swift transference of the decedents assets, but will still be part of the public process.

So what makes the most sense for you? A careful analysis of your personal goals and objectives is crucial in the development of a qualified estate plan. Of course, this brief article is no substitute for careful consideration of how to best structure your estate. Be sure to consult with an experienced estate planning attorney and your financial planner.

Neal A. Deutsch is a Certified Financial Planner^™, Registered Securities Principal and President of Chestnut Investment Group in Suffern, NY, helping people with financial planning since 1984. Please feel free to call Neal at 845.369.0016 or email him with your questions at neald@chestnutinvestment.com Feel free to visit his website at www.chestnutinvestment.com