Probate, Here’s Why You Might Want To Avoid The P Word

Simply put, probate rarely benefits the beneficiaries. Ok it’s not that simple, but it is accurate. Why? Probate costs people time and money. I see it all the time. So much so in fact, that part of my business is helping executors to sell property that’s in probate. It’s that big of a hassle. Once property and other assets are locked up in the system it’s hard to say how long it will take to go through the process. Let’s take a deeper look at probate to understand where the challenges lie.

WHAT IS PROBATE?

Probate is an automatic legal process that’s triggered when someone dies. It can be avoided if that person has set up his or her assets in such a way that the probate courts are not needed. What happens in probate court? I’m glad you asked.

• The deceased person’s will, must be proven in court to be valid.
• The deceased person’s property must be identified and inventoried.
• All property must be appraised.
• All debts and taxes must be paid.
• The remaining property must be distributed as the will (or state law, if there’s no will) directs.

Now, the lawyers and court fees come out of the estate. These are assets that would have otherwise gone to the beneficiaries. In some cases this can amount to a massive portion of the estate as you’ll soon see.

THE NITTY-GRITTY OF THE PROCESS

After your death, the person you named in your will as executor or, if you die without a will, the person appointed by a judge, files papers in the local probate court. Your executor must find, secure, and manage your assets during the probate process. Depending on the contents of your will, and on the amount of your debts, the executor may have to decide whether or not to sell your real estate, securities, or other property. All things going smoothly, this could take between 3 months and a year. Rarely, do things go smoothly.

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WHAT KINDS OF PROBLEMS CAN ARISE?

Well that depends on a few things. For example, how far apart are the probate attorney and the executor. Now you’d think with all the technology at our fingertips that distance wouldn’t be a big deal, but you’d be wrong. Did you know that most documents filed need an original signature? This excludes the use of both faxed and emailed signatures.

How about the number of beneficiaries that are named in the will? Are there more than 2? Do they live close to the probate attorney? Not only will all beneficiaries need to do a lot of signing, but the documents will have to be shipped from one location to the next and the next. These documents need to be submitted all along the probate process. As you can imagine, this can get costly both in time and money.

OK, let’s say that distance is not a factor. Care to guess what the chances are that the beneficiaries see eye to eye on everything in the will? What about everything that the executor decides? Probate with multiple beneficiaries is ripe for disagreement and even confrontation. This contention very often leads to multiple lawyers each there to pick apart the estate on behalf of their client. A very expensive proposition.

Unexpected challenges occur all too often during probate. For example, what happens when a distant relative or ex-spouse contests the will? Oh boy, this will not go well. If any of the beneficiaries were counting on that money, they can expect major delays.

Taxes are a great reason to avoid probate. First of all, in probate none of the money is sheltered from tax. Second, if taxes are owed on an estate, the probate can’t be closed until a letter from the IRS confirms that the taxes were paid.

Is there a family business that’s part of the probate? Well this could get messy. Perhaps there’s a partner in the business still living that’s not one of the beneficiaries of the estate. Pretty complicated stuff.

The point is that there are very few reasons one would choose to go into probate. However, if you find yourself in probate or are an executor for an estate you might want some professional help navigating the assets.

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Now, if you are a Real Estate professional in this space or you’d just like to work with the above 50 market in any capacity, I’ve got great news. I will be teaching a Senior Real Estate Specialist designation course coming in March 2018 so save the date and reach out to me at [email protected] for updates.

If you’re looking for additional resources on coaching, mentoring and related subjects go to www.tonipatillo.com or contact toni(at)tonipatillo(dotted)com.

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