PROBATE: GOOD OR BAD?
Merriam-Webster.com defines probate as “the action or process of proving before a competent judicial authority that a document offered for official recognition and registration as the last will and testament of a deceased person is genuine.”
Basically, a deceased person’s estate must go through probate, where his or her assets are collected, liabilities liquidated, taxes paid, and property distributed to heirs. But some people may tell you to avoid probate if you can. Why? Is probate good or bad?
I think probate is like a chair. Is a chair good or bad? It depends on how you will use it. If you hammer nails with it, a chair is a bad tool. If you sit in it, it’s a good one. If you want to protect your estate from creditors, probate can be a good tool. When probate is filed, it’s as if you started a clock, and during a specific time period creditors can file a claim against your estate. Once the period has passed, if creditors missed their opportunity, they are out of luck. But if you avoided probate, that clock was never started. A creditor could come out of the blue eighteen years later and still have a claim.
Probate also forces an estate valuation, which could help save estate and income taxes.
The procedures for probate differ from state to state. In Texas, probate is a super fast process that costs next to nothing, even on multimillion dollar estates. In some states, like California, probate can be a very complicated and expensive process, and you may want to avoid it for that reason. Another potential issue: probate is a public process. If you’re a private person who doesn’t want everyone to know what your assets are and who you left them to, you may not want your estate to go through probate.
Probate is neither good nor bad. Don’t let anyone scare you into spending thousands of dollars on legal fees to avoid probate. Decide for yourself whether it’s the right tool for you.
Reference: Money Matters with Ken Moraif (May 27, 2014)
Filed Under: Probate; Estate Administration; Estate Planning
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