What is Probate?

(This article was originally published in the Wakefield Daily Item on January 17, 2012)


Q. I already signed a Will, does my family go through Probate when I die?

A. Maybe, it depends on how you have set up your assets while you are alive.  Also, bear in mind that a new Probate law comes into effect on March 31, 2012.

Your Will is still valid under the new law, as long as it was valid under the old Probate law.  A Will by itself is always subject to Probate if there are assets to be probated.

A Will simply tells the Probate Court how to distribute your assets and who should be in charge (under the supervision of the Court, of course).  That person will be called the Personal Representative under the new Probate law.  Without the Probate process a Will is just a piece of paper.  For this reason, upon your death, your family must file a Probate Petition to ask the Court to “allow” your Will before your probate assets can be distributed to your named beneficiaries.

Probate assets include those assets titled at the time of your death solely in your name and which fail to list a beneficiary.   For example, bank accounts or real estate are common probate assets.  Only probate assets are subject to pass under your Will.

Non-probate assets may include assets that you hold jointly with someone else (e.g. a joint tenancy on a house), assets that list a beneficiary (e.g. an IRA or life insurance), or assets that you own in Trust (e.g. a bank account titled in the name of the Trust).  If titled correctly, non-probate assets may pass upon your death to the named beneficiary or joint owner without any need for a Court probate.

If you are not careful, however, the beneficiaries you list in your Will might receive very little if your assets when you die are mostly non-probate assets.  There are sad situations where a parent creates a Will providing that their assets shall pass equally to their children, but for purposes of banking convenience they list only one child as a joint owner on all their accounts.  When the parent dies, everything they own passes to that one child who may then refuse to share it with his siblings.  The siblings could then engage in a long, expensive court battle with no guarantee that the Court will order that the funds be shared amongst the siblings as intended by the decedent in her Will.

The new Probate law is intended to make Probate speedier and easier for simple Estates – but at this point, only time will tell whether those goals will be achieved.  Probate historically has been a time-consuming, expensive process.  For this reason and more, many people take action so that upon their death, their loved ones avoid the Probate Court.

In most situations, I do not recommend joint ownership with children as a strategy to avoid probate.  Imagine if during your lifetime, the child gets divorced and your former son or daughter in-law walks away with your asset.  Or if the child gets in a car accident and is sued, the court may award your money to the plaintiff because the child was listed as a joint owner.  Joint ownership on real estate or ‘life estate’ deeds can also create tens of thousands of dollars in unnecessary capital gains taxes for your child if the real estate is sold during your lifetime.

Instead, I recommend the use of Trusts to avoid Probate and to achieve many other potential planning goals.  A mix of one or more Trusts can achieve various goals including but not limited to (1) protecting your assets against the risk of nursing home costs, (2) ensuring your family can avoid Probate Court Conservatorship proceedings if you become incapacitated, (3) protecting inheritances for a disabled beneficiary, (4) eliminating or minimizing Estate Taxes upon your death, and (5) protecting inheritances against divorce, creditors and lawsuits.

Oftentimes, people come to me with Trusts and they do not fully understand what goals their Trust accomplishes.  For instance, sometimes people think their assets are in an irrevocable trust and protected against the risk of nursing home costs.  Quite frequently, their Trust states that they have the right to amend or revoke the trust, thereby making the Trust revocable and all the assets in the trust countable to Medicaid.  For this reason, it is essential that people fully understand what their Trust achieves and does not achieve.  Because of the importance of this issue, I will focus on Trusts in my next column.

Finally, I strongly advise that everyone signs a Will, even if they have modest assets or they expect to have only non-probate assets upon their death.  You never know what you will die owning (if you die in a car accident, your probate Estate may recover a big settlement), so it is important you sign a Will to direct how any probate assets pass when you die.  And remember, without a valid Will, you are entrusting our legislature to direct where your assets go.  With all due respect to our legislature, its plan for your probate assets may not match yours.


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