What You Should Know About Probate: Bella Vista Probate Lawyer
What is Probate?
Probate comes in 2 flavors.
The first is “living probate” or guardianship. This is the legal process that determines your legal rights when you can’t because of mental incapacity.
The second is what you probably typically think of. It is final Probate. Having a Will almost makes sure that your estate will go through Probate. However, not having a Will does too.
Probate comes with its own set of problems. It consists of over 20 steps with many of them requiring a Judge’s signature before proceeding.
What is the Impact of Probate?
Probate has a financial, emotional, and time impact.
First, probate will cost 6% or more of your GROSS estate. Your gross estate is all you own without deducting expenses and what you owe. For example, if you have a $200,000 house with a $200,000 mortgage (that is $0 of equity), it will still cost 6% of the $200,000 ($12,000).
Emotionally, people often feel lost and at the mercy of the system. A lot of this is from fear of the unknown. They’ve never been through a probate.
Time is also a huge factor in probate. Even if everybody agrees on everything, it will take at least 8 months. 6 months of that is a required period of time for creditors to make their claims.
Probate is not necessary. By planning now, you can avoid probate later.
Is Probate Necessary?
Final probate has these functions:
- Verifies and validates your Last Will and Testament
- Give your creditors time and opportunity to make their claims
- Gives upset family members an opportunity to challenge your Will
- Inventories your estate (makes the contents public)
- Finally, distribute your estate and transfers title
Is probate needed to accomplish all this? No.
It consists of over 20 steps with many of them requiring a Judge’s signature before proceeding.
Avoid Probate with a Living Trust
Whether or not you have a Will, Probate will be required if you owned any property in your name.
A Living Trust makes Probate unnecessary by changing the way your property is titled and owned. You give ownership of your property to your Living Trust. You don’t own the property in your own name, but you still have full control and dominion over your property. Your Living Trust owns your property. You own your Living Trust.
Many people are scared because they think they are giving up control and dominion over their property. That just isn’t the case. You make the trust, put property into the trust, and have the benefit of the trust property. You and you alone control the trust, and therefore the property in the trust. You can buy, sell, trade, mortgage, lend, borrow just as before you created your Living Trust.
In short: the fact your Trust owns the property makes no or little difference on the way you live and conduct your affairs.
The big difference happens later, when you pass on. Because of the way a Trust is structured, your successor Trustee steps in and follows the directions you left in the Trust. Because you didn’t own the property in your name, there is no probate to be done. There’s no publicity, and compared to a Probate, little expense, or convenience, or time spent for your loved ones.
The Living Trust also helps if you are incapacitated. It helps you avoid the indignity of a Guardianship. A Living Trust names somebody to manage the assets in Trust if you lose the ability to manage your own affairs, perhaps due to dementia.
Not Just for the Wealthy
Trusts aren’t just for the wealthy.
If you have just a $100,000 estate, they financial cost would be $6,000 (in today’s dollars).
Let’s say that is a house that should appreciate at 5% per year. In 10 years, it’s worth about $163,000. The cost of probate is now $9,780. That’s 50% more in just 10 years.
If you created a trust and put the house in it, you spend $2,000 today. Your family saves $7,780 or more later… Not to mention the time and anguish of Probate.
Just imagine the cost of Probate in 20 years. (Its actually about $16,000 for that $100,000 house.)
Maximizing Your Living Trust
- Fund your Trust. A Trust only works if you remember to put your assets in it. If you keep your property in your name, you have defeated the purpose of a trust.
- Keep your Trust current.
- Update your Trust if family circumstances change.