The 5 Big Worries of Estate Planning: #2 Probate
Why does everyone want to avoid probate? Many individuals share this goal when starting the estate planning process, but what exactly does it mean to “avoid probate” and why is probate so evil?
In very general terms, probate is the process by which the estate of a decedent is administered and the assets distributed to decedent’s intended beneficiaries. In order for a person’s will to be followed, that will has to be admitted to the probate court and the assets have to be administered with the supervision of the probate judge. The entire probate system is designed to ensure that assets are preserved for the intended recipients, that fiduciaries have accountability, and that the post-death property distribution process is as fair and equitable as possible. That all sounds good – so what’s the fuss about?
The primary complaint is with respect to the cost. As with any court supervised procedure, the cost and time commitment of the probate administration process in Ohio can sometimes be significant given the rules currently in place. The cost doesn’t come about by virtue of some tax or some other government imposed fine. The cost is associated with having to hire counsel to help walk the family through the court procedures to get everything done properly and out the other side. Because of that cost, many clients would prefer to spend a little more time with their attorney right now to get a plan in place to eventually transfer assets without court involvement. Examples might include things like naming beneficiaries on bank accounts, setting up a trust, or filing an affidavit to name beneficiaries of real estate.
As with most things, there is a good and bad side. Saving cost is almost always a good thing; however, it’s also useful to consider what you’re giving up. If a person had 4 children that didn’t get along, would it be wise to name all 4 children as direct and immediate beneficiaries of a piece of real estate so that they’d all be in title and have to agree whether to sell or not, when to sell, how much, which realtor to hire, etc.? In that case, probate administration might actually help the family insofar as the property could be sold by the one child appointed as executor and then that child could distribute the cash among his/her siblings. Alternatively, perhaps the family might set up a trust so that the real estate could be sold through the trust to avoid the disagreement problem mentioned above and at the same time save a few dollars that might otherwise have been spent on working through the court processes.
In sum, while avoiding probate is often a worthwhile goal, it’s crucial to understand what you’re avoiding and why.
– Mark CoriellTags: estate planning, Probate