What is PROBATE?
Probate is simply one way to move assets from one generation to the next. It is a Court procedure (a court case) you file in Probate Court with one major goal in mind — to change title to different assets.
If something happens to you, for instance, you would want to change every asset that has your name on it to your wife, children, or other beneficiaries. Your beneficiaries need access to your assets in order to sell, buy, mortgage, or use the money in the accounts. That process is called Probate.
Probate takes a long time to finish in Court — largely because of all the rules and notice requirements. Probate usually takes 1-2 years to complete. However, if beneficiaries are battling in Court, probates can be open easily for 5-10 years.
Probate is also very expensive and the fees for your estate are determined by the law that is already set. Probate fees for attorneys, the courts, and executor or personal representative are estimated at 4-8% of your entire estate.
For example, if you own $1,000,000 when you die, your heirs will pay $23,000 to the attorney (minimum) and $23,000 to the person in charge of the probate (often called an executor or personal representative). That’s a minimum of $46,000.
Now on top of that $46,000, attorneys can also be paid for extraordinary fees. So let’s say there is some people battling inside of your probate estate. Guess what? The original $23,000 does not cover that! You will be billed hourly (likely) for any work that the court labels as extraordinary.
Don’t let Probate be the reason your family starts fighting. Discover how you can avoid the process by signing up for a strategy session today, by clicking this link.
MUST MY ASSETS GO THROUGH THIS PROCEDURE? WHAT IS MY ALTERNATIVE?
You can elect not to go through the rough probate procedure. You can get out of probate by making a Living Trust (called Family Trust or Revocable Trust as well). When you draft a living trust, you are informing the courts that you don’t want to go through the probate process and you want to “change title” privately.
WHAT ARE THE VARIOUS WAYS TO CHANGE TITLE TO ASSETS?
The best way to understand how to change title is to first understand that there are three “buckets” for title to your money, property and accounts.
- A Probate Bucket
- A Living Trust Bucket
- A Beneficiary “Designated” Bucket
The Beneficiary “Designated” Bucket (#3) holds “special” types of assets such as your 401k, IRAs, joint tenant assets, and your life insurance. These assets avoid the Courts (Probate) upon death and do not usually need a living trust.
But for all other assets, they are either in the Probate Bucket or in the Living Trust Bucket.
The rule of thumb is that every asset that you own (that is not included in the Beneficiary Designated Bucket) will go through probate.
Now that Probate process is the public system that is afforded to everybody. But if you choose private system, you will be drafting a document called a Living Trust. Then you must move the assets into the bucket — a process called funding.
When someone dies with assets held in this special Living Trust Bucket, you avoid the public probate court system and have a private administration in order to change title — called Trust Administration,
Trust Administration is cheaper, faster, and private.
Think about what you want your family or heirs to go through. Do you want to go through the public system? Fine. Pay the fees. Your beneficiaries will save time and money by doing a trust today.
But, if you want to take things into your own hands, go ahead and make a living trust and make sure to fill the bucket with your stuff.
Your next step is to schedule a discovery call with me by clicking this link.