Many estate planning attorneys and financial advisors talk about using your estate plan to “avoid probate”. But what on earth does that actually mean?
Probate is a way for a court to determine who should become the owner of an asset (real estate, bank accounts, cars, etc.) after someone has died. Not all assets have to go through probate. In MA and RI, the following assets typically do not go through probate:
An asset you co-own with someone where the survivor gets the asset. This is most commonly seen in homes owned by married couples.
An asset with a beneficiary designation or a transfer on death designation, so long as the person named as the beneficiary is alive.
An asset that is held by a trust before the person dies.
Some other types of assets that can pass by operation of law, such as an LLC ownership interest if the Operating Agreement says who the ownership goes to and that person is alive.
Otherwise, for all other assets, when someone dies here is generally what probate looks like:
The person named as the Executor (called the Personal Representative “PR” in Mass) fills out a form to submit to the probate court letting the court know that the person has died.
The probate court appoints the Executor/PR to be the legal representative of the estate. The Executor/PR gets a letter from the court that shows they have the legal authority for the estate.
The Executor/PR finds all the probate assets. For things like bank accounts, the funds are cashed out and put into a new account under the name of the estate.
The Executor/PR pays valid debts that are presented to the court by creditors, including Medicaid (**this can be a BIG one, people are often surprise by Medicaid claims).
After the creditor period is over, the Executor/PR makes distributions to the heirs and closes out the estate.
Just having a will does not mean that you will avoid probate!
So why is this something to avoid? Here are the top reasons:
Cost: unfortunately the probate process is confusing, and not something that people can usually do on their own. The cost of the attorney to complete a probate can be $1k-$7k, depending on the complexity of the assets and debts. There are also additional filing fees and advertising fees.
Time: Assets need to be held until the creditor period is up, because the Executor/PR can’t give money to heirs if there isn’t enough to pay the creditors. In MA that is 1 year from the date of death, in RI that’s 6 months from the opening of the probate. In both states there can be exceptions to those timelines which can tie up the probate assets for even longer! If there are minor children or disabled heirs who are relying on immediate access to funds, this can be a big problem.
Privacy: Probate documents are public record, which you might not want. There is also typically a notice that has to be placed in the paper.
Family Dynamics: All heirs need to be notified in the event of a probate, even if an heir isn’t actually receiving any money from the will (think estranged child). This can stir up all kinds of family conflict, which can also result in conflict in the court proceeding.
For probate avoidance, the best option is to work with an estate planning attorney to establish a trust and fund it during your lifetime. This can also be a vehicle to potentially save on estate taxes as well. Contact us to find out more about the process, and to discuss whether probate avoidance is important for you and your family: https://www.sheehanlawoffice.net/contactus.
DISCLAIMER: The Rhode Island Supreme Court and Massachusetts Supreme Court license all lawyers in the general practice of law. Neither court licenses or certifies any lawyer as an expert or specialist in any particular field of practice. Sheehan & Associates Law does not represent you in any matter unless we enter into a written engagement agreement. Our attorneys are licensed only in RI and MA, and the above may not apply to the jurisdiction you’re located in or have assets in. The above should be considered general education, and not legal advice. If you need legal advice, hire an attorney!