Most people aren’t very familiar with the laws around wills, trusts, or probate. It’s important to understand the basics, and know enough to recognize the common myths when you encounter them. This is a collaborative contributing post and meant for general educational purposes, so please check with your lawyer for your specific situations.
The cost of probate will eat up all of the estate assets
There are a lot of horror stories about the high cost of probate. If you believe the worst of these stories, you might think that your family won’t get anything after the fees of an estate lawyer and court costs. Luckily, this is not actually true.
Many estates don’t actually need probate proceedings. Only assets owned in the deceased person’s name alone need to go through probate. If the value of these assets is small, you can take advantage of probate shortcuts, which are much less expensive.
If the estate does require formal probate, costs are likely to be 5% of the value of the estate. There are some exceptions, however.
In some states, lawyers charge a percentage of the value of the estate as their fee, instead of asking for a flat fee or hourly rate. If someone contests the will, then costs can rise too. The estate will need to hire an attorney to defend it, adding more costs.
If someone dies without a will, the state gets everything
There are many reasons to write a will (and to arrange life insurance), but worry about the state taking your family’s inheritance away is not one of them. If you die without a will in place, then state law applies. Every state has its own rules on who would then inherit.
In most cases, your spouse or children would be the first to inherit. The rules vary, but in most states, a surviving spouse and minor children will share the assets of the deceased parents.
In some cases, assets do go to the state. This happens only when no surviving relatives can be found.
It takes years to probate an estate
Most estates will not take years to resolve. The only delay in most cases is mandated by state law that gives creditors time to file claims. This window varies in different states but usually starts when notice of the probate proceeding is published in a local paper and runs for three or four months to a year.
After this waiting period, the estate can be closed as soon as the representative has gathered all the assets, paid debts and paid taxes.
Probate can drag on for years, but this is usually caused by other problems. If a family member challenges the will, or children cannot agree on how to divide the assets of a deceased parent, then the court may have to intervene, which causes delays.
If the estate is so large that it owes federal or state estate tax, then this can also slow things down. Ongoing income can also cause delays, but typically probate does not drag on for years and years.
Another way to avoid probate is to create a revokable living trust. Talk to your estate planning attorneys to get this set up.