When clients come in to see me about creating an estate plan, one of the most commonly expressed goals is that they want to avoid probate. There are good reasons to avoid probate – it is time consuming, expensive, and it is a public proceeding. Read on to learn five important facts about Probate.
1. Probate is the court process of changing the title on assets owned by a deceased person. If a person owns bank accounts, investment accounts, real estate, or other assets in his or her individual name at the time of death, no one will be able to gain access to those assets until the court has appointed a Personal Representative (formerly called executor). For example, once appointed, the Personal Representative will be able to go to the bank or other financial institution where the assets are located with the court appointment in hand, and change the name on the account from the deceased person’s name to the name of the estate. Once that is done, the Personal Representative as the legal representative of the estate, will have access to the account and can sell investments, pay bills, make distributions, etc.
2. Not all assets need to be probated. If a husband and wife have a joint bank account and the husband dies, the joint bank account belongs automatically and entirely to the wife. She does not need to probate the account in order to get access to it. Similarly, if a deceased husband left an IRA, 401K plan, life insurance policy, or annuity of which the wife is named as the beneficiary, she does not need to go to probate court to gain access to those assets. The wife, or any named beneficiary, would simply contact the financial institution or life insurance company directly and complete the paperwork to gain access to the asset or life insurance proceeds. However, if the bank account was in the husband’s individual name, or the named beneficiary is not living, then those assets will have to be probated.
3. Probate does take a long time and it can cost a lot of money. Under the Massachusetts Uniform Probate Code, the law which governs the probate process in Massachusetts, a Will can be allowed and a Personal Representative can be appointed in as soon as seven days following a death.. The reality is that it usually takes the courts several months to process even the most routine probate filing. During that time period, no one has access to the probate assets. That can mean expenses such as the mortgage payment, real estate taxes, and the funeral bill are not paid for months. Court filing fees and legal fees to prepare the file probate documents and advise the Personal Representative can be significant.
4. Being in probate while you’re alive is worse than being in probate when you’re dead. If a person becomes incapacitated and cannot pay his bills, talk on the phone, sign an income tax return, or make health care decisions, who will do those things on his behalf? If the incapacitated person does not have a durable Power of Attorney and Health Care Proxy appointing another to act for him, then someone (A family member? A friend? A public agency?) will have to petition the probate court to be appointed as his conservator and/or guardian. A conservator is a person appointed by the probate court to administer the finances of an incapacitated person. The conservator will pay the bills, file tax returns, apply for Medicaid benefits, etc. A guardian is charged with making decisions about the incapacitated person, such as health care and residency decisions. The actions of a conservator and guardian are overseen by the court and many decisions require court approval. All of this takes time and costs money.
5. With a little planning, avoiding probate is easy. The good news is that avoiding probate is relatively easy. Creating and funding a Revocable Living Trust as part of your estate plan is a good way to pass your assets to your intended beneficiaries outside of probate. A Revocable Living Trust allows the maker of the Trust to remain in full control of the Trust assets during lifetime. At his death, the assets titled in the name of the Trust are immediately available without the need for probate. A Trust, as well as a durable Power of Attorney and a Health Care Proxy, can also eliminate the need for a court appointed conservator or guardian should a person experience a period of incapacity during lifetime. Making sure that you have contingent beneficiaries named on retirement accounts and life insurance policies is another simple step that can be taken to avoid probate.
Avoiding probate is a desirable goal that can save your family a significant amount of time and money. Talk to your estate planning attorney about the best way for you to pass your assets to your beneficiaries free of probate.
Attorney Suzanne R. Sayward is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. She is a partner with the Dedham firm of Samuel, Sayward & Baler LLC. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
June 2014