The Probate Process

What is Probate?

Probate is the formal legal process that gives recognition to a will and appoints the executor or personal representative who will administer the estate and distribute assets to the intended beneficiaries. The laws of each state vary, so it is a good idea to consult an attorney to determine whether a probate proceeding is necessary, whether the fiduciary must be bonded (a requirement that is often waived in the will) and what reports must be prepared.

The basic job of administration and accounting for assets must be done whether the estate is handled by an executor in probate or whether probate is avoided because all assets were transferred to a living trust during lifetime or jointly owned. In planning your estate, more important than minimizing probate is minimizing the real issues that can make probate difficult, such as lawsuits by heirs.

Should You Avoid Probate?

The living trust is often marketed as a vehicle that allows you to "avoid probate" upon your death. Probate is the court-supervised process of administering your estate and transferring your property at death pursuant to the terms of your will. Probate is rarely the calamity naysayers claim. In addition, many types of property routinely pass outside of the probate process, even without the cost of establishing a living trust. Such property includes life insurance or retirement plan proceeds, which pass to a named beneficiary by designation rather than pursuant to your will, and real estate or bank or brokerage accounts held in joint names with right of survivorship.

While it is true that the property passing under the terms of a living trust upon your death will "avoid probate," it should be noted that there may or may not be actual value in that result. A properly drafted will in many states can eliminate some of the steps otherwise required in the probate proceedings. In addition, much of the delay and red tape customarily associated with probate is a result of tax laws and tax filing requirements, which cannot be eliminated through a living trust and the avoidance of probate. Finally, a living trust can almost never totally avoid probate, and a simple will is needed to "pour over" to the trust any property that has not been transferred to the trust during your lifetime.

Property that passes at death through a revocable living trust must be transferred to the trust, administered by a trustee who may or may not charge fees, and then transferred out of the trust to the beneficiaries. The costs associated with these steps and the costs associated with tax filings are often ignored by living trust marketers. A comparison of the costs of probate and those of a living trust should be made on a case by case basis.

Living trusts, in fact, have great value as part of estate planning, but not necessarily to avoid probate. A living trust, if properly prepared and administered, can be a very effective tool to manage assets in the event of illness, disability or the effects of aging. In light of the aging population, the use of living trusts to minimize the risk of elder financial abuse and address similar issues, should be an important consideration in an estate plan.

Disclaimer

This article was provided as a public service by the ABA Section of Real Property, Trust and Estate Law. While this information is about legal issues, it is not legal advice or legal representation. Because of the rapidly changing nature of the law and our reliance upon outside sources, there is no warranty or guarantee of the accuracy or reliability of information contained in the above article. http://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning/the_probate_process.html