Yes, Probate Really Is That Bad!

When Sheila’s mother died with only a Last Will and Testament (Will) in place, she couldn’t fathom that she would still be knee-deep in probate a year later without an end in sight. Sheila often tells her friends and anyone who will listen that if she knew then what she knows now about probate, things would be completely different. Between the time it has taken, the amount she has spent, and the turmoil her family has experienced, the stress was overwhelming.

The nightmarish process of probate has pushed Sheila to place much more importance on her own planning and in doing the right things so her children can avoid what she is experiencing. She hopes others will heed her warning and make proper Estate Planning more of a priority in their lives.

What Is Involved When It Comes to Probate?

If you die without a Last Will, or with a Last Will but without a funded trust, the probate court will oversee distribution of your property. Probate is a lengthy, public, and expensive process, among other things. To explain it simply, the after-death probate process involves: proving the authenticity of a decedent’s will (if they had one); appointing a personal representative (either an executor nominated in a Last Will and Testament or an individual asking to be appointed as the administrator of the intestate estate, which can result in many people fighting over who gets to serve in that role); identifying and inventorying a person’s assets; paying debts and taxes; identifying heirs; and eventually, after everything else is done, distributing property according to the Will or, if the decedent died intestate, according to state law.

If you are like most people, you think of probate as something that happens only after death. And you may believe that a Last Will and Testament avoids probate. Both of these are very unfortunate misconceptions. The nightmare of probate can occur:

• During your lifetime, if you become incapacitated and do not have a Power of Attorney in place naming somebody to handle your legal and financial affairs, resulting in the need for conservatorship, also called lifetime probate or living probate;
• After your death if you die without a Will or a trust (also called dying intestate); or
• After death when a person dies with a Will as their only or primary Estate Planning tool, and there are assets solely in that person’s name that do not have a joint owner or a named beneficiary.

Why Probate Is Such a Nightmare (And What People Often Don’t Know About It)

Why has probate been such a nightmare for Sheila and others similar to her? USA Today recently published an article uncovering what most people simply don’t know about probate. And, it’s a lot! However, by having this knowledge and taking the right steps in your legal planning, you can easily avoid probate altogether.

Here are 10 things people underestimate most when it comes to probate:

• How much time it takes: In a survey described in the USA Today article, only 2 percent of respondents got the time duration for probate right — across the country, it takes an average of 20 months. Thirty-seven percent had no idea, and 33 percent guessed various intervals less than six months! Even in states where probate goes “quickly,” that speed is nearly impossible. Probate is never a few weeks. It takes months at a minimum and can be equivalent to a full-time job when you take it on!
  • Even if your executor is well-prepared, probate is time-consuming. As described earlier, each asset in the estate must be assessed, valued, sorted, and distributed. A large estate or multiple beneficiaries can draw out the process.
  • Other factors such as out-of-state beneficiaries, assets that require tax returns, and estates with unusual or out-of-state assets can delay the probate process even further.
• How much it will cost: More than half of survey respondents said they have no idea how much probate costs, and only 4 percent believed it would cost more than $10,000. Ten percent of survey respondents guessed probate would cost less than $1,000. Probate typically costs 3–7 percent of your estate’s value.
  • The cost of probate depends on the size of the estate in question, and it also varies by state.
  • In Virginia, for example, if your estate is worth $500,000, the executor’s fee alone will usually be 5 percent of that, meaning $25,000, and this doesn’t take into account any of the other fees associated with probate.
  • The amount of fees that your estate will have to pay can add up quickly. This includes court costs, executor fees, attorney fees, accounting fees, and appraisal fees.
  • Generally, your estate will cover these costs. However, the more probate expenses you have to cover, the less your beneficiaries will receive.
• Creditor claims. Health care facilities and other creditors can recover money from your estate as reimbursement for what they spent on your care. Other creditors may also look to be paid back from your estate before your heirs are entitled to receive any inheritance. Sometimes creditors wipe out the balance of a probate estate and leave nothing for your beneficiaries.
• Many people think inheritance is automatic: You may erroneously think that having beneficiary designations in place makes inheritance automatic after your death. Nothing is automatic or easy about inheritance or probate. Even when you have beneficiary designations in place, after you die, each of your named beneficiaries have to show up to each financial institution and submit proper claims paperwork, including a death certificate, and often wait hours at the financial institution to get their funds, which can then take weeks or months. This ability to file a claim and receive their inheritance assumes that:
• each of your named beneficiaries know that they are named and where each of your accounts is located;
• none of your beneficiaries are disabled;
• none of your beneficiaries have predeceased you;
• each of your beneficiaries is able to make an appointment at each financial institution; and
• each of your beneficiaries is able to get an original version of your death certificate.

Please see my prior series of 3 articles on all of the problems with beneficiary designations, starting with the fact that there is more than $100 billion of unclaimed property in the United States, much of which is due to failed beneficiary designations.

• Most people don’t realize the extent to which probate is a very public process: Anyone can go through the probate court records to determine how much your probate estate was worth, what you owned and owed, and how you divided it. Just look at all the articles written about celebrities and other public figures who have died and had their estates go through probate, many of such articles we have written in the past.
  • Today, many courthouses are online, so that means that anyone in the world can access probate files.
  • It’s not unheard of for distant relatives to make claims against a decedent’s estate after learning that probate is under way.
  • Probate actions also have to be published in a newspaper, so creditors who have a claim against the decedent can find out that there’s money on the table. So, if you want privacy, you’ll want to avoid probate!
• Most people don’t think about the stress of probate during a tough time: Probate requires frustrating intrusion by the court, lawyers, and the public into a very emotional, private, family time. When a close family member dies, wouldn’t you want to take that time to grieve?
• Most people don’t account for the fact that since probate can be a long, stressful process, it can leave room for family disagreements and disputes: Beneficiaries might have hard feelings, or siblings might clash when it comes to their inheritances. A long probate period only gives unhappy family members more time to start a fight or initiate litigation, which can further delay the process and add to the expenses.
• Most people don’t realize how little control they have over the process: The court, not your family, will supervise and authorize the settling of all debts and the payment of inheritances, in its time and with its delays.
• Most people don’t think about how multiple states add more headaches: When you own real estate in more than one state, your estate will require probate procedures in each of the states.
• Most people don’t realize that beneficiaries don’t receive any money until the process is complete, which can be devastating if minor children or other dependents rely on that money to cover living expenses.

Avoiding Probate

Better Estate Planning generally means using a Revocable Living Trust to protect your assets from probate or an irrevocable Living Trust Plus® to protect your assets from probate plus lawsuits plus long-term care expenses that can otherwise be paid for by Medicaid. Either type of living trust (a trust created by you while you are living) allows a trusted family member or a professional trustee who you pick to distribute your assets after your death pursuant to your wishes as clearly expressed within the terms of your trust.

• A living trust to avoid after-death probate, along with a Financial Power of Attorney and an Advance Medical Directive to avoid lifetime probate, will give you much-needed peace of mind and save your family a tremendous amount of stress, time, and money should something happen to you.
• A living trust allows for the distribution of assets after death according to your wishes and without court involvement.
• A General Power of Attorney names someone you trust to make financial decisions on your behalf if you become incapacitated, thus avoiding the need for a conservatorship (called guardianship of the property in Maryland and some other states), which is the court-supervised process of living probate.
• An Advance Medical Directive names someone you trust to make medical decisions for you if you’re not able to, thus avoiding the court-supervised guardianship process that’s also part of lifetime probate.

Plan in Advance to Avoid Probate

As you can see, if you die or become incapacitated without proper Estate Planning in place, it could create unnecessary headaches and expenses for those left behind. But don’t worry, because our firm is here to help. The Farr Law Firm’s estate administration division handles all aspects of probate and estate administration, employing a team of professionals with wide-ranging expertise.

Our Estate Planning team can also, of course, create your living trust estate plan and help you keep everything up to date so that your estate does not go through probate after your death.

Once your estate plan is completed, it is important to review your estate plan at least every 3 to 5 years and make necessary updates accordingly, or to join our Lifetime Protection Plan® to ensure that your documents are up to date each year or whenever needed.

If you have not done your Incapacity Planning, Estate Planning, or retirement and long-term care planning, or have not had your planning documents reviewed recently, please call us to make an appointment:

Estate Planning Fairfax: 703-691-1888

Elder Law Fredericksburg: 540-479-1435

Retirement Planning Rockville: 301-519-8041

Elder Care DC: 202-587-2797