If you’re reading this, I hope I have given you insight on why an estate plan is important. However, I’ve been dealing more and more with probate and cases where there was no plan. Each time, I’ve had to be the person giving bad news. Normally, that bad news takes one or two forms. Often times, it actually involves both.
The first round of bad news, generally is that the assets will have to go through probate. One of the main problems with probate is that there are costs that will have to be paid for before the assets can be accessed. So, the person eventually receiving the money probably will have to find at least $500 before probate can even filed. This includes attorney fees, court filing fees, and often a bond.
In addition to having out of pocket expenses, the probate process normally takes months. Depending on the type of probate proceeding, this can range from a few months to several months and often times I tell clients to plan on at least a year. At some point during those months, some money may distributed from the estate, but generally its months before any money leaves probate.
Also, another huge complication with probate is if there are creditors of the person who passed. If there are creditors, opening a probate estate gives them access to any money they can prove they are owed. This may not present a problem, but may allow creditors to take all the assets before the heirs receive any money.
Finally, one of the last problems with probate is that all heirs will be involved. This can cause major problems if the heirs were not intended to be involved. The heirs will at least have to be notified and the court likely will also require their signatures on many of the filings.
Having that many people involved can cause more problems and time delays, but it’s an even bigger issue if the assets are not going where expected. If the house was supposed to go to one child, then must be divided between all five it can be a large shock and loss. Because a will may only be submitted within a year of a person’s death, if the will disinherits people or gives a specific asset to one person and it is not admitted into court within that year, the asset will not to go the intended person.
It’s also common for a person to list one person as a beneficiary on an asset with the intention that beneficiary distribute that asset to multiple people. Beyond potential tax consequences, the beneficiary also has no legal obligation to distribute that asset as intended. I’m sure you can imagine the emotional and financial problems that can cause.
To properly ensure probate will be avoided and assets go where intended, it’s so important to set up a proper estate plan. If you (or someone you know) isn’t sure they are avoiding probate and assets will be going where intended, it’s time to check on your estate plan!