It's definitely worth talking a bit about probate, since avoiding
probate is probably the biggest reason people get a living trust.
The probate court serves a very important function in our society. In the absence of some other arrangement (i.e. a funded living trust -- which requires settlement rather than probate), this is the court that provides for the orderly payments of debts and transfer of property after someone’s death.
The probate court will verify whether a particular document is a valid will and then ensure the will is enforced and assets properly distributed.
Without the probate court to enforce a will, there sometimes would be chaos.
However, the system comes with a price. The price is time and money.
The probate process begins when the executor named in the will files the deceased person's will with the local probate court. The executor then
The biggest difficulty during probate is usually the requirement that every piece of property be located, inventoried, and valued. This can take a lot of time depending on the number of assets, their location, condition, value, etc.
The fees that often add up fast are the professional service fees.
Depending on how big the estate is, and what assets it has, there may be
fees to accountants, lawyers, property appraisers, and others. See Probate Attorney Fees.
There are also probate court fees and publication fees. These vary from state to state, but normally total less than $500. However,
some states have recently begun to raise their probate court fees. In
North Carolina, for instance, a 1.5 million estate, will now pay about
$6,000 in probate court fees. Only two years ago, that fee would have
only been $3,000. Here's more about probate taxes and fees.
As is a common theme -- it is the larger estates that will save the most money by avoiding probate. You can read more about this at Is Probate Lengthy and Expensive?
However, some states require that a separate “guardian-ad-litem” be appointed by the probate court to oversee the executor's work. This is often another attorney, and his or her fees are also charged to the estate.
Throughout the process, there are opportunities for beneficiaries or creditors to complain to the probate court if they don't like something the executor is doing. This is a double-edged sword.
So, having your estate distribution supervised by a probate court is not inherently good or bad. It just depends on your situation. Most people would rather the probate court not be involved as it usually will result in increased cost and delay. See How to Avoid Probate. Also, it's important to remember that some assets won't have to go through probate. For more about that read What Is Subject To Probate and Joint Ownership.
For many, a living trust is a better option. But the issue of probate court supervision is just one of the issues to consider. For others, see Advantages of a Living Trust and Disadvantages of a Living Trust.
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