Wilson Financial Services Inc.

(859) 824-9422

Estate Read Time: 4 min

Problems with Probate

Many of us hope to leave something behind for our loved ones when we pass away. But the probate process is complex. To understand how to better manage potential probate fees, let’s explore what probate is and how the process works.

What Is Probate?

Probate is the legal process that wraps up a person’s legal and financial affairs after their death. During the probate process, a person’s property is identified, cataloged, and appraised. In addition, probate makes certain any outstanding debts and taxes are paid. It can be a complex process filled with very specific legal requirements.

For example, if someone dies without a valid will, the probate court sees that the deceased person’s assets are distributed according to the laws of the state.

If someone dies with a valid will, the probate court is charged with ensuring the deceased person’s assets are distributed according to their wishes.

Probate Process

Every estate passes through probate following the owner's death. Probate can take anywhere from a few months to more than a year. If there is a will, and one or more of the heirs chooses to contest the document, the process can take a lot longer.1

Probate also can be expensive. Even though probate costs are capped in some states, they can easily cost 3 to 7 percent or more of the estate’s value. That’s calculated on the gross value of the estate – before taxes, debts, and other expenses are paid. And if the probate process is challenged, legal costs can rise.2

Finally, probate takes place in a public court. That means everything is a matter of public record, so there is no privacy. Anyone can find out exactly what was left behind and how much each of a deceased person’s heirs received. They can also review the court records for the deceased person’s estate. Those who have concerns for their heirs’ privacy may want to take steps to manage the probate process.

Property That May Avoid Probate

Some assets can be structured, so they may not have to go through probate. Here’s a partial list of assets that may avoid the probate process:

1. Property held in a trust3
2. Jointly held property (but not common property)
3. Death benefits from insurance policies (unless payable to the estate)4
4. Property given away before you die
5. Assets in a pay-on-death account
6. Retirement accounts with a named beneficiary

1. TheBalance, 2022
2. Investopedia.com, 2021
3. Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.
4. Several factors will affect the cost and availability of life insurance, including age, health and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Share |
 

Related Content

When Life Insurance Becomes Taxable

When Life Insurance Becomes Taxable

Life insurance proceeds are generally tax-free. But not in all cases.

You Are Not Alone it Just Feels That Way

You Are Not Alone it Just Feels That Way

Let’s start getting your financial priorities and attitudes in sync with model behaviors.

Is a SEP-IRA Right for Your Business?

Is a SEP-IRA Right for Your Business?

For some, the idea of establishing a retirement strategy evokes worries about complicated reporting and administration.

 

Have A Question About This Topic?







Thank you! Oops!

Organizing Your Finances

Spark joy and become more confident by giving your finances the home organization treatment.

Tax-Advantaged Health Care Planning for Retirement

Heading into retirement with confidence is easier if your planning includes steps to minimize taxes, especially as it relates to health care planning.

It’s Time to Have a Talk with Your Parents

One of the strangest developments in the ever-evolving child-parent relationship is reaching the point when an adult child starts dispensing advice to his or her parents. It’s a profound, but natural turning point in the relationship.

View all articles

Should I Pay Off Debt or Invest?

This calculator will help determine whether you should invest funds or pay down debt.

Should I Buy or Lease an Auto?

This calculator compares the financial impact of leasing versus buying an automobile.

Home Mortgage Deduction

Use this calculator to assess the potential benefits of a home mortgage deduction.

View all calculators

An Inside Look at Retirement Living

A number of questions and concerns need to be addressed to help you better prepare for retirement living.

Your Cash Flow Statement

A presentation about managing money: using it, saving it, and even getting credit.

Principles of Preserving Wealth

How federal estate taxes work, plus estate management documents and tactics.

View all presentations

Video: The Independence of Financial and Emotional

Greater financial and emotional confidence brings greater independence. Isn’t that what it’s all about?

Are Alternative Investments Right for You?

With alternative investments, it’s critical to sort through the complexity.

Dreaming Up an Active Retirement

When you retire, how will you treat your next chapter?

View all videos