When you pass away, your county Probate Court oversees the gathering up of your assets, payment of your bills, and distribution of anything left over.
Why is Probate a Big Deal?
Probate is a problem because:
1. The process is public. Anyone can see the court files and figure out how much you had and who it's going to. Do you want the public to know how much your spouse and kids are getting when you're gone?
2. Probate is expensive. The fees and other expenses of probate typically come to between 2% and 5% of the value of your assets! Put another way, if you have $1 million in savings, your home equity, and a business, your estate will pay between $20,000 and $50,000 in expenses after you're gone!
3. Probate is long. Probate takes no less than 6 months and the process often extends over a year. Your loved ones will have to wait to receive your gifts until the process is over.
How can you avoid Probate?
Probate Court only oversees property you owned in your individual name. Jointly owned property, property with a living beneficiary named, and Trust property won’t go through Probate. So naming beneficiaries on your accounts will keep those accounts out of Probate. You can even name a beneficiary/beneficiaries on your house using a document called a Transfer on Death Designation Affidavit.
Accounts are easy enough to deal with; they get split evenly between the named beneficiaries, but real estate is another matter. Each of the named beneficiaries owns an equal share of your real estate. And that means that your beneficiaries must agree unanimously before anything can be done with the property. A resistant beneficiary can hold the other beneficiaries hostage until they agree to sell out to the trouble-maker at a bargain price.
How does a Trust help?
A Trust does the same two basic things a Will does:
1. It appoints someone to handle your property (called your "Trustee")
2. It gives that person instructions for how to handle your stuff.
A Trust is also like a legal "box" that you put your stuff into (your house, accounts, and personal property) to avoid probate. However if you leave something out of the Trust, it’ll have to go through Probate.
Assuming you’ve put everything you own in your Trust, because there's no Probate, your affairs will be kept private. There's no public record of the Trust and no one must know anything about what you own and who’s going to get it after you're gone.
Also, the cost of "settling" a Trust after you die is significantly lower than for administering an estate through Probate, and the process can be streamlined significantly. That way, your loved ones aren't spending tens of thousands of dollars and waiting a year or more to receive what you've given them.
If you're unsure whether your or your loved one's long-term care plan is adequate, give us a call and schedule a time to sit down with one of our attorneys for an honest, no-cost assement. We can be reached at email@example.com or 937-985-1843.