Wills and Probate

What is a Will?

A Last Will and Testament, more often just called a Will, is a legal document that becomes effective after your death and only after it is admitted to probate. It must typically be signed by the person making the Will (called the Testator) in front of two witnesses and a notary public. A Will is often an important part of an estate plan, but it’s not as important as most people think.

What is Probate?

It’s essential to understand that using a Will as your only estate planning tool means that your estate will go through probate, often called “the nightmare of probate.” Probate is a time-consuming, complex, and often very expensive court-supervised process that most people rightfully wish to avoid. A Will only becomes valid once it is admitted to probate, and when an executor of the Will qualifies as Executor, this starts the probate process. A Will provides written instructions to the probate court telling the court who you want to name as the Executor of your Will.

What is the Role of an Executor?

Once your Will is admitted to probate and your nominated executor is officially appointed by the court to act, your Executor is then in charge of the probate process, which typically includes:

• sending notices to heirs (these are the people who would inherit from your estate if you died without a Will);
• filing an inventory of assets and their values as of the date of death; and
• filing annual accountings detailing all money coming into the estate and leaving the estate during a one-year period — these complex annual accountings must balance to the penny and often take people 40-80 hours every year to prepare. There is no limit to how many years an estate can be in probate.

An executor also does things such as paying your final bills, liquidating and perhaps consolidating your financial assets, selling your real estate (if you have real estate in multiple states, your real estate will need to go through probate in each state), figuring out what to do with your personal belongings, filing your final tax returns, and eventually distributing your assets to your named beneficiaries or to a trustee to hold your assets in trust for your named beneficiaries. These are tasks that must be accomplished after death regardless of whether or not you have a Will, and are not inherently part of the probate process. Even if you have a Living Trust to avoid after-death probate, these tasks must still be accomplished by your successor trustee.

You might direct assets to a testamentary trust, for example, if your named beneficiaries are minor children, persons with special needs, individuals who have a hard time managing or holding onto money, or disabled relatives or elderly parents who might be in need of nursing home care and relying on Medicaid long-term care benefits.

A Will is Most Crucial if you have Minor Children

If you have minor children at the time of your death, a Will is especially important, as it is the only legal document that can nominate one or more guardians to raise your children. A Will can also nominate one or more trustees you wish to be in control of managing and using your money for your children. Problematically though, if you name a trustee in your Will, in many states this “testamentary trustee” will be required to go through ongoing probate, filing accountings with the probate court every year, until such time as you direct that the trust should be terminated and the remaining funds distributed to your adult children, typically at age 25, which is when science tells us the brain has generally fully developed.

Probate is the court-supervised public proceeding used to change the title to assets from the name of an individual who has passed away into the name of the living beneficiaries you have named in your Will. It is also the process by which creditors of a decedent can file claims to collect their debts and where interested parties who have a complaint regarding the deceased can file a complaint in the form of a Will contest.

Why Most People Want to Avoid Probate

First, probate requires frustrating intrusion by the court, lawyers, and the public into a very emotional, private, family time. A judge may have to determine who is a legitimate creditor and may have to rule on distributions to children and other beneficiaries. Your estate may have to hire a lawyer to guide the executor through the legal maze.

Second, all of your affairs will become public knowledge. The contents of your will would be on file in the courthouse, for all to read, and wills are read. They are read by salesmen, by newspaper reporters, and by the morbidly curious, all seeking in one way or another to take advantage of the publicity required by the probate process.

Third, probate takes time. Unless your executor is absolutely certain that there are no debts owed by the estate (a rare occurrence, since almost everyone leaves some small debts behind) and is to accept personal responsibility for your debts, probate laws typically mandate that your assets not be distributed for one year after you die, to allow creditors time to petition the court for full payment. Any assets distributed before that time come with a heavy cost for your executor because your executor could be personally liable for the repayment of all of these amounts, even if the beneficiaries to whom distributions are made have already spent the funds that were distributed. Thus, your executor will likely be very hesitant to distribute before all debts and taxes are paid. 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.

Fourth, on a national average, the probate process takes from 5% to 8%of your family estate out of the hands of your beneficiaries and gives it to the executor, lawyers, courts, and other outside individuals.

Planning with a Living Trust can save the average American family about $30,000 in probate fees, attorney fees, and court costs alone, according to a national study by the AARP. The upfront cost of estate planning with a living trust is usually slightly higher than planning with just a Will, but the savings in the end almost always makes the initial expense more than worthwhile.

Fifth, if you are not competent at any time before your death, the trustee of your living trust can serve as the caretaker of your property. This can avoid the expensive and embarrassing public guardianship/conservatorship proceeding, where your children have to prove that you are not able to manage your own affairs. A Living Trust combined with a power of attorney provides the most complete protection available for someone to manage your financial illegal affairs if you become incapacitated. A power of attorney avoids lifetime probate, also called guardianship and conservatorship.