Q: What is probate and why does everyone want to avoid it?
A: Probate is the court process of changing the title on an asset when someone passes away. Real estate, bank accounts, and investment accounts owned in a person’s individual name at death which do not have a beneficiary designated are examples of assets that need to be probated. The term ‘probate’ is often used to describe the process of administering someone’s estate after death. This typically involves marshalling the probate assets, paying debts, taxes and expenses, and ultimately distributing the estate assets to the beneficiaries entitled to receive them.
Delays, costs, aggravation, and loss of privacy are all good reasons to avoid probate. If an asset needs to be probated, that means no one will have access to that asset until the court has allowed the probate petition and a Personal Representative has been appointed. A delay in being able to access money to pay expenses such as funeral costs or to make mortgage payments creates a difficult and aggravating situation for surviving family members who are trying to manage matters after someone has passed away. In Massachusetts, the probate court system is currently in serious disarray and delays are significant. Probate can be costly, with attorney fees and court filing fees that must be paid. Finally, probate is a public proceeding meaning that anyone who wants to snoop into the business of a decedent’s probate estate has the opportunity to do so.
Avoiding probate is relatively easy. For example, if you own assets jointly with your spouse or child, the asset will pass automatically and entirely to the survivor when the first joint owner passes away; no probate would be needed. Assets that have a named beneficiary to receive them also avoid probate provided the named beneficiary survives the owner of the asset. IRAs and other retirement accounts, life insurance, and annuities typically fall into this category. Assets that are titled in the name of a Trust also avoid probate. While owning assets jointly with another person is a way to avoid the need to probate the assets there are some downsides to joint ownership that should considered before adding someone else as an owner on your account.