In my most recent article, I talked about what probate is. In this article, I’ll talk about some aspects of probate that might make it desirable. Before I begin, it should come as no surprise that there is no “one size fits all” answer regarding whether probate is good or bad. Each person must understand their own financial and family situation to determine the best estate planning approach for them.
Cost – This is probably the issue that most people think of when they think of probate. While there are many costs related to probate (like court filing fees, personal representative fees, attorney fees, accounting fees, and appraisal fees), there are also often similar costs related to creating probate-avoidance plans. For example, if you create a revocable living trust, you will likely still have attorney fees for drafting the trust documents and trustee fees for administering the trust, but you will also have costs associated with transferring title of your assets to the trust. Often, with costs, the will versus trust question is a case of “pay now or pay later.”
Time – “It takes too long” is another common reason cited for wanting to avoid probate. Yes, probate takes some time to complete, usually six to twelve months unless the estate is complicated, but there can be advantages to that. For example, with probate, creditors have a specific period in which to file any claim they have against the estate. (In Indiana, that period is the earlier of three months after the first publication of notice of the estate’s opening or nine months after the person’s death.) If no probate estate is opened because you created a trust before your death, it’s possible that all the assets might be distributed and then a creditor makes a claim within the nine-month deadline. If the claim is valid, getting the creditor paid could become complicated, perhaps even requiring your beneficiaries to return some of what they received under the trust or the trustee being personally responsible for paying the claim.
Privacy – Probate cases are public record and the information is accessible by anyone who wants to access it. If you want to ensure that no one other than your chosen representative and your beneficiaries know what’s in your estate or how you distributed it, you’ll need a plan to avoid probate.
Family disagreements – Estate issues are often sensitive and unfortunately not all family and friends may agree on how an estate should be handled. There could be disagreements about whether you were of sound mind when making your will or regarding how to interpret ambiguous provisions of the will. To avoid creating lifelong rifts in the family, it is sometimes better to allow a neutral judge to make the final decision on disputed issues.
Death taxes – While it used to be true that a good portion of a probated estate could be subject to federal estate or Indiana inheritance tax, for most people, death taxes are no longer an issue. Indiana eliminated inheritance tax in 2013 and the federal estate tax now applies only to estates with a value of over about $11.2 million dollars.
Whether probate makes sense depends on many factors, including your age, health, family situation, and your wealth. If you’re young and in good health, adopting a complicated plan to avoid probate now may mean you’ll have to re-do it as your life situation changes. Also, if you have little property (less than $50,000 in Indiana), you might not want to spend the time and money planning to avoid probate because your estate might qualify for a simplified administration procedure. But if you’re in your 50s or older, in poor health, or own a significant amount of property (especially real estate in more than one state), you may want to do some probate-avoidance planning. And, as always, if you don’t have a will, get one, or the state will determine who gets your assets.
Carrie S. Cloud is an attorney practicing at 146 E US Highway 52, Rushville, Indiana 46173. The information in this article is for general informational purposes only and is not legal advice.