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Probate Explained |
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What
Are the Pitfalls of Probate?
Have you ever
wondered what will happen to your estate after you die? How long will it
take for your loved ones to receive the estate you’ve left them? Will each
receive what you’d like them to have?
If you’re
like most people, your estate will go through a lengthy probate process.
What Is Probate?
Probate consists
of the court proceedings that conclude all your legal and financial matters
after your death. The probate court distributes your estate according to
your wishes — if you left a valid will — and acts as a neutral forum in
which to settle any disputes that may arise over your estate.
The probate
process we have today is based largely on the medieval English legal system.
In feudal times, only powerful families owned land. These large estates
were normally passed down from father to son. This transfer was naturally
a matter of great political consequence, and thus of great interest to the
king. So the proceedings were made formal, complicated, and costly.
Over the years,
while much of the legal system has been made easier and more accessible,
the probate process has remained lengthy and complex.
There are
a number of problems with the probate process that make it worth avoiding.
Time
The probate
process can take a great deal of time. The settlement time frame for many
estates is from nine months to two years. Complex or contested estates can
take much longer.
With few exceptions,
your heirs will have to wait until probate is concluded to receive the bulk
of their inheritance. Request
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Cost
Of course,
all the probate court’s “help” with your affairs comes at a price. Probate
can be very expensive.
Depending
on the state, probate and administrative fees can consume between 6 and
10 percent of your estate.1 That percentage is calculated before
any deductions or liens are taken out.
Lack of Privacy
The proceedings
of the probate courts are a matter of public record. Anyone with the time
and inclination can go to the county courthouse and find out exactly how
much you left to each heir and to whom you owed money. This leaves your
heirs with little or no privacy.
There Are Answers
Fortunately,
there are strategies you can use to avoid the probate process altogether.
A trust may enable you to pass your estate on to your heirs without ever
going through
probate at
all.
For individuals who may need to withdraw money before age 59 1/2 the IRS may give you a 10% penalty for early withdrawal. That is it! |
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