Often, people come to my office seeking to avoid probate. They often report having heard frightening stories about the time and cost of the probate process but aren’t sure exactly what probate is. I will break down the basics in this post.
What is probate?
When a person dies, his financial affairs must be settled. There may be funeral expenses, medical and creditor bills that have to be paid. Assets may also need to be consolidated and distributed.
If that person has assets that did not transfer by way of trust, deed or contract, then the payment of funeral bills, medical and creditor bills, and asset distribution will have to be overseen by the probate court.
What are the costs of probate?
Probate Court charges a filing fee for opening an estate. To open a full administration in Cuyahoga county Ohio, for example, the initial filing fee is $250. The executor or administrator of the estate is also entitled to fees for his work. Many probate courts set out a fee schedule in the local rules based upon the value of the estate. The executor or administrator may also hire an attorney to assist in the estate’s administration. The attorney will traditionally be paid for his time out of the estate proceeds.
How long does probate take?
A full administration generally takes at least six months to conclude. The reason for this is that under Ohio law, creditors have six months from date of death to assert a claim against the estate. Hence, generally, the executor or administrator is advised against making distributions until after the window for creditor claims has passed. Other factors may extend an estate. For instance, if a home or business needs to be sold, for instance, the estate cannot be closed until after the sale is concluded.
Why would you want to avoid probate?
Many seek to avoid probate in order to avoid the filing requirements of probate court, due to their cost as outlined above, the public nature of the filings (probate records are public), and the time involved with meeting the court’s requirements.
How do you avoid probate?
There are a number of ways to avoid probate including inter vivos trusts (also known as family trusts, revocable trusts, and living trusts), transfer on death affidavits for real estate, beneficiary designations on life insurance policies, annuities, and retirement plans, and pay on death designations on bank accounts, among other techniques. See our post on Avoiding Probate 101 for more info. http://www.perlalaw.com/blog/ways-to-avoid-probate-101/ Please note that a Last Will and Testament alone will not avoid probate.
When you shouldn’t avoid probate?
There are times when you may want probate court oversight. One example is if you do not have a trusted person to administer your estate. When an estate is administered through probate, the executor or administrator must file an accounting with the Court showing everything that went into and out of the estate. The Court will review that accounting to make sure that everything adds up and that the appropriate heirs receive their inheritance. The heirs must also be served with a copy of the accounting so that they can review it themselves for accuracy. Further, you can require that the administrator post a bond so that if the estate is administered incorrectly, the bond company can ensure that the heirs are not harmed.
Another example is if you are leaving assets to a minor child and want the Court to oversee how the guardian spends the funds for the minor’s benefit. Guardians are required to ask the Court for permission before expended any funds on behalf of a minor. Further, you can require that the guardian post a bond for the protection of the minor child in the event that the guardian acts improperly.
There are also situations where all of a person’s liquid assets transfer outside of probate per contract (ie. beneficiary designations, pay on death accounts), and as a result, there are no liquid assets available to pay for funeral expenses or to maintain real estate transferred until it is sold. For that reason, sometimes it makes sense for a person to have some liquid assets transfer via probate for this purpose.
For more on probate, contact a Cleveland Probate Lawyer, Cleveland Estate Planning Lawyer or Cleveland Estate Administration Lawyer.