People are often advised to avoid probate due to the cost and administrative burden involved. It’s good advice, but it’s not a panacea. There’s still a lot of work involved when someone passes away.
A lot of the confusion has to do with the meaning of the word “probate,” how it’s avoided, and what avoiding probate doesn’t avoid.
What is Probate?
Strictly-speaking, the term “probate” refers to the court process of transferring ownership of property from the person who died to the people named in their will. If they didn’t have a will, the estate in effect creates one for them saying who should get their stuff — essentially, their closest relatives. These are called the “rules of intestacy” and someone who dies without a will is referred to as having died “intestate.”
Getting involved with the probate court does impose costs and delays, but they are not significant unless problems arise, such as missing heirs or disputes. There’s a simplified procedure for smaller estates of under $25,000 in Massachusetts.
The court process can be avoided by using other means to convey property at death. These generally include joint ownership, trusts and beneficiary designations. If all the deceased individual’s property passes through one of these means, there’s no “probate” in terms of involving the probate court.
And What is Estate Administration?
However, there’s usually a lot to do, including:
- Arranging for the funeral and memorial service.
- Distributing the individual’s possessions, either as they dictated in their will or other document, or as the heirs decide is fair.
- Paying any final bills.
- Cleaning out their home.
- If they own a home or other real estate, selling it.
- Providing death certificates and proof of identity to all the institutions where they had accounts. When there are multiple beneficiaries, they will each have to provide proof of identity to the various banks and investment houses.
- Filing a final income tax return.
- For larger estates, over $2 million in Massachusetts, filing an estate tax return.
Perhaps none of these items are “probate” in the literal meaning of the word, but they are included in the concept of probate or estate administration because they are the responsibility of the personal representative for the estate. As you can see, it’s a lot of work and in this context the additional burden of the probate court may be relatively minor, especially if you can hire a lawyer to take care of it — adding to the cost, but not so much to the burden.
Still, Avoid Probate If You Can, Best By Using a Trust
All of this said, we do advise avoiding probate, especially through the use of trusts for two main reasons. First, the act of funding the trust ultimately makes everyone’s life much easier. “Funding” the trust means retitling accounts in the name of the trust. We find that when clients take this step, they consolidate accounts leaving much less work for their trustee after they pass away.
Second, the use of a trust puts one or two people in charge. (We generally advise against having more than two trustees.) This often makes the whole process of liquidating accounts easier. We’ve seen instances with beneficiary designations on accounts where the whole process drags on because one beneficiary is uncooperative.
So, take steps to avoid probate if you can but don’t think that it resolves all the challenges involved with administering an estate or that it’s a catastrophe if you don’t.