If you pass away without a living trust, your family members may have to go through a court process called “probate.”
What is Probate?
Probate is when the court supervises the processes that transfer legal title of property from the estate of the person who has died (the “decedent”) to his or her beneficiaries.
Probate can be a stressful, time-consuming and costly process. After grieving, your family members will have to file a petition with the probate court. This petition appoints an executor who is responsible for gathering all your assets, paying your creditors, and distributing your assets to your heirs.
The probate court oversees every step of the process, which can be time-consuming and confusing. Your executor has to post a bond with the court, file accountings with the probate court to ensure the assets are distributed correctly. If a house needs to be sold, the probate court needs to approve hiring of a realtor, the listing needs to be published in a newspaper and the court needs to approve the buyer’s offer. All of this may require a court hearing, which may be several months after filing the petition because the probate courts are overwhelmed.
Your family will have to pay the court filing fees (which alone can cost more than preparing a living trust prepared by an attorney), pay for a bond, pay executor and attorneys fees which are based on the gross value of the estate (which can be tens of thousands of dollars).
BTW, this is all public. Probate proceedings are a matter of public record, so everyone can read everything filed with the probate court. No privacy in probate court.
Moreover, there is a “living probate” called a conservatorship for people who are unable to make financial decisions or care for themselves.
Understandably, most people don’t want to go through probate. That’s why the #1 reason why people need an estate plan is to avoid probate.
What if you have a will?
How about a will? Why is a living trust better than a will?
A will doesn’t avoid probate. A will is a document that specifies who shall receive your property when you pass away, and may include other provisions such as a guardianship nomination. But a probate court is still involved – all those expenses and processes described above still apply.
A will allows you to…
- Choose your executor
- Name a guardian for your minor children
- Choose who gets what and avoid intestacy laws
- Waive the bond requirement
Your family members still go through probate, even if you have a will. They still have to pay the filing fees, executor, and attorneys. The probate court still has to approve everything. It still takes a huge amount of time and money.