What is Probate?
Probate is the legal process which is necessary when there are assets of someone who died, which require some kind of formal legal authority to transmit them to the heirs. For example, if a person owns a house, their heirs will not be able to sell the house unless they have a court order which formally appoints the executor. Or if there is a bank account which does not have a designated beneficiary, the bank will not hand over the money without that same kind of court order.
Doesn’t a Will Do That?
A Will is an important document to have. It does not, however, replace probate. A Will is your instructions to the probate court, for whatever assets have to go through probate. People often make the mistaken assumption that if they have a Will, no probate will be necessary. That is incorrect.
Why Should I Avoid Probate?
Probate is not a good system to have to go through. If you are very lucky, you might get through probate for only a few thousand dollars in costs. However the costs can easily run many times more than that if there are any complications.
Probate also takes a lot of time. Nearly all probates, other than very small ones, take at least a year to get resolved. If there are any complications — for instance, an unhappy family member, a property which takes time to sell, or disputes with creditors — probate can take quite a few years.
It is very easy for a disgruntled heir or a dissatisfied creditor to drag things out, costing everyone else time and money. The probate system is set up so that it will be easy for claimants to make their arguments. However that means that if they want, they can gum up the works. Sometimes this is done intentionally, just to force the estate to settle in order to avoid interminable delays or outrageous attorney fees.
And all of this is done in a public file which anyone can read.
How Do I Avoid Probate?
There are a number of ways you can set up your affairs so that your heirs will not have to go through probate after you are gone.
One of the most common is a revocable living trust. When you establish a trust, you create a legal entity which can hold assets. You then transfer the assets into the trust. On your death, the assets in the trust avoid probate because they are no longer in your name. You can read more about living trusts here.
One of the easiest ways to avoid probate is to make sure that all of your financial accounts have designated beneficiaries on accounts. Assets that have these designated beneficiaries (sometimes called TOD’s or POD’s) automatically avoid probate.
Alaska now has a law allowing Transfer Death Deeds. These are essentially a way to designate a beneficiary real estate. Unfortunately there are some problems with the law, so that they do not work well for everyone. In some situations, though, this can be a good option.
How Do I Know Which Option is Best For Me?
These laws are complicated, and the same plan which works great for one person, could be a complete disaster for another. The only way to make sure you have the plan that will work best for you, is to meet with an experienced estate planner.