You have likely heard people talking about how important it is to try and avoid probate when possible; however, unless you have a firm understanding of the probate process itself you may not understand why it is so important to avoid probate. The simple explanation for why avoiding probate is such a common estate planning goal is that probate costs your loved ones both time and money. As a general rule, the longer the probate of an estate takes, the more the estate assets are diminished as a result of the costs and fees that go along with probating the estate. In addition, estate assets are often held up, and therefore unavailable to the intended beneficiaries, until the probate of the estate is complete. For all of these reasons, avoiding probate is a common estate planning goal.
What Is Probate and Why Is It Necessary?
When you die, you will leave behind an estate that is made up of all your real and personal property along with tangible and intangible assets. The ownership of your estate assets must be legally transferred to the new owners. Before that can occur, an accurate inventory of the assets must be made and any taxes owed on the transfer of the assets must be paid. All of this is accomplished during the probate process.
Are All Assets Included in the Probate Process?
One of the most important factors in determining the time it takes to probate an estate as well as the costs involved is the type of assets involved. Not all assets are required to go through probate. Non-probate assets can be transferred immediately following the decedent’s death to the intended beneficiary. As such, an estate that is made up of predominantly non-probate assets typically takes less time to probate and incurs less expenses whereas an estate that includes mostly probate assets will likely take longer to get through the probate process and will face higher costs related to the probate process. Some common non-probate assets include:
- Assets held in a trust
- Proceeds of a life insurance policy
- Assets held in an account with a “Payable on death (POD)” or a “Transfer on death (TOD)” account designation
- Certain types of jointly held property
- Certain retirement benefits
What Happens During the Probate of an Estate?
In order to understand why probate takes so long, and therefore avoiding probate is such a popular estate planning goal, it helps to know what happens during the probate process. Although every estate is unique, the following are common steps in the probate process:
- Opening probate – the probate process is initiated by the Executor of the estate as determined by the decedent’s Last Will and Testament or by someone who volunteers to be the Personal Representative if the decedent died intestate, or without leaving behind a valid Will.
- Identifying and locating heirs in an intestate estate – if the decedent died intestate, the legal heirs of the estate must be determined by the court. A diligent search must then be made to locate those heirs.
- Notifying creditors – creditors of the estate must be notified that probate is underway. This may be done individually for known creditors but must also be done by publishing a notice of probate in a local newspaper.
- Reviewing creditor claims – creditors have a specific period of time within which a claim against the estate must be filed or it is forever barred. Submitted claims are reviewed and approved claims are paid out of estate assets.
- Litigate challenges to the estate – if a Will contest is filed the contest must be litigated before probate may proceed because the manner in which the estate is probated will depend on the outcome of the litigation.
- Paying estate taxes – a federal estate tax return must be prepared and any gift and estate tax obligation paid.
- Transferring assets – finally, the remaining estate assets are transferred to the intended beneficiaries and/or legal heirs of the estate.
These basic steps can take a year or more to complete for even a relatively modest estate. The more valuable and/or complex the estate assets are, the longer it typically takes to get through the probate process, making avoiding probate a popular estate planning objective.
If you have additional questions or concerns regarding avoiding probate, contact the experienced New Hampshire elder law attorneys at Debruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.