Probate vs. Non-Probate

We will often get telephone calls from individuals who have been told either through a recent television program or a speaker at a seminar that it is best to avoid “probate” at all costs and recommend the establishment of a trust to avoid probate.  It may be helpful to understand what “probate” actually is.

While people use the term “probate” to describe the whole process of administering an estate through the court system, the term “probate” actually refers to the procedure that is followed to file a decedent’s Will with the Clerk of Court.  Once the Will has been “admitted to probate”, it is effective to pass title to property, most importantly, real estate in the county where the decedent lived.

The remaining aspects of estate administration with the Clerk (qualification of an executor, filing inventories and accountings, and other matters) may or may not be necessary given the circumstances and ownership of the assets of the decedent.  For example, a bank account that is held jointly with right of survivorship may not have to go through “probate” –actually the estate administration process.  Retirement accounts (IRAs and 401Ks) may be able to be transferred simply by appropriate beneficiary designations and will not have to go through the estate administration process.  These actions can be taken without having to formally create a trust to pass assets “outside of probate”.  A trust can be helpful in certain situations (managing assets for minors and elderly parents, and so forth) and an attorney can assist you in determining whether a trust is appropriate in your particular situation.  A full administration of an estate may be appropriate and, in fact, may be required, depending on the nature of the ownership of the assets and any creditors’ claims.  An attorney can help the family through this process.  Even if a trust is used, there may still be a required court or probate process to pass title to the real estate and to free the trust assets from claims of creditors of the person that died.

Currently “probate” or administration costs are not assessed on real property and are $4 per $1,000 worth of assets identified as personal property that actually pass through the estate, which do not include joint accounts, and other accounts such as 401K or life insurance as already noted.  Therefore the cost of “avoiding probate” through some of these options may actually be higher than the cost of going through the administration would have been.

Finally, while minimizing “probate” (estate administration) may be desirable, the end goal of an estate plan is to transfer assets in the manner in which the person making the plan wanted them transferred to make sure their final wishes are carried forward.

 

DISCLAIMER: THE INFORMATION PROVIDED IN THIS BLOG POST WAS PREPARED BY KLUTTZ, REAMER, HAYES, ADKINS AND CARTER AND IS INTENDED FOR INFORMATIONAL PURPOSES ONLY AND NOT, IN ANY WAY, CONSIDERED LEGAL ADVICE.

J. Andrew “Andy” Porter, Practice Areas: Estate Planning, Wills and Trusts, Corporate Matters & Business Law

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