What is probate?
Probate is a legal process undertaken when an individual dies while personally owning assets. Since an estate consists of assets such as checking accounts, savings accounts, investments, retirement accounts, automobiles, personal property, real estate, clothing, jewelry, etc., everybody has one. Granted, if someone dies with very few assets and if no one disputes the distribution of the assets or argues about who is to get what, then chances are that no probate action would be undertaken. However, if someone with significant assets such as a home, car or titled ownership of cash or investment accounts dies while holding the assets personally, there is little choice but to enter probate in order to be able to legally transfer those assets. This is because assets owned by a living individual must be transferred by that living person prior to his or her death, or they need to go into probate in order to be transferred.
How can probate be bad?
For example, if Dad dies and he owns a boat in his name alone, it could not be sold to pay funeral expenses until probate is completed. If Mom passes away and she has $50,000 in CDs owned personally by her at the local bank, without a designated POD or TOD, the kids can’t get at the money until after probate. If a spouse dies and he/she has a significant retirement account through their employer, unless proper beneficiary designations were made and kept current, it all goes into probate. Remember, assets of a deceased individual go into probate because for them to be transferred, they must be transferred by a living person. The probate process may be necessary to designate who that living person will now be, among other things.
Once assets go into probate, they just sit there and wait until the court has decided what to do with them, who will be the personal representative of the deceased and how creditors, debtors and other interested parties are to be dealt with. This process could take many months and require significant fees to the court, attorneys and then a personal representative. In some cases hard assets, like real estate and vehicles, are allowed to deteriorate from non use or vacancy. The related expenses along with the deterioration of assets reduce the value of an estate and ultimately means that heirs and loved ones of the departed will receive less. In many cases they will receive much less. The goal of avoiding probate is to steer clear of the accruing fees, reduce the time requirement and simplify the difficult and intrusive process of having assets distributed by a legal appointee when, who may or may not make the same decision regarding the transfers that the deceased would have made.
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