As an estate planning firm, we are often speaking with people about what will (or what they would like to have) happen to their estate at their death. During some of these conversations, people treat probate as though even the word has cooties – maybe we should call it “The Court Process that Must Not be Named”. Probate certainly has a bad reputation, but is that terrible reputation really justified? Are there any instances when a client may even want a probate?
Let’s begin by clarifying what “probate” really is. The legal definition of probate is the process of proving that a legal document claiming to be a Will is in fact a correctly executed legally valid Will. Colloquially, we refer to probate as the court supervised process of administering the estate of a deceased person. This process can take place if the deceased person died with a Will (testate) or even without one (intestate).
Clients may need to go through a court supervised probate if the deceased person (the “decedent”) died and had assets that either (i) were not owned as a joint tenancy with rights of survivorship or (ii) did not have a beneficiary designation.
But is that so bad? One con of probate is that probate is generally a public proceeding. The necessary documents (including a statement of the assets in the estate and their values) are filed in the court records and are then public record.
Probate can also be problematic because of the time involved. In some states (Louisiana, New York, and California, to name a few) the process can take several years to complete. During that time, the assets may be tied up (unavailable for distribution) and legal fees may be accrued. However, in New Mexico, a non-contested probate with no unexpected complications can take just around a year. Sometimes even less!
In some instances, particularly in a state where the actual court process is fairly straightforward, clients may even want an asset to go through probate. One example of this scenario is if a client has multiple children and a piece of real property (and didn’t want to invest in a trust at the time). In New Mexico we are allowed to use a Transfer on Death Deed. If a client owns real property and has one child, this type of deed can be used to transfer the property to the child at the client’s death. This would avoid probate. However, in the prior example, I described a client who has multiple children. In that instance, transferring one piece of property to numerous people can be problematic. What if one child wants to sell the property and the others don’t? What if they all agree to sell but they disagree on what real estate agent to use? Or they disagree on an acceptable selling price? What if the children don’t get along?
In circumstances like these, a client may actually like the idea of having a personal representative handle the sale of the house and distribution of the proceeds (in the court process). Probate may also be even more beneficial if there was a mortgage on the property described above. Having the court approve the payment of creditor claims and the fair payment of the remaining balance on the mortgage can be a great way to avoid unnecessary burden and conflict, particularly for an otherwise simple and modest estate.
If you have questions about the probate process and whether relying on probate, using a transfer on death deed, or creating a trust may be the best option for you and your family, speak to our firm or another qualified attorney.
Post by: Madison R. Jones, J.D., M.B.A.
Disclaimer: These materials are designed as a general overview and should not be relied upon for legal or tax advice. Please consult a qualified attorney and/or tax advisor for compliance and up-to-date information and advice specific to your circumstances.