Probate

Probate

What is Probate?

Probate is the legal process that is usually required when a person dies. It normally consists of four steps.

First, if there is a Will, the person named as Executor in the Will submits a request to the probate court for a determination that the Will is the last Will which was made by the deceased. If there is no Will, then usually a surviving spouse or child will submit a request for the court to determine that such is the case. In either case, the court’s decision will determine who will serve as the Executor (the person responsible to make sure that the rules are followed, the bills paid, and the assets distributed to the rightful heirs).

Second, the Executor then looks for and gathers up all of the property which the decedent owned at the time he or she passed away.

Third, any debts that were owed by the deceased are determined and paid.

Finally, the remaining assets are distributed to the heirs in accordance with the Will of the decedent (or in the manner dictated by Idaho law in the event there was no Will). The Executor usually has some flexibility to determine whether (1) to liquidate assets and distribute cash or (2) to distribute various assets to the different heirs.

How to Avoid Probate:

Whether or not a particular situation must go through the probate process is determined by state law. The Idaho Code generally requires probate to occur any time a person dies leaving either (1) assets with a value in excess of $100,000 or (2) any real estate (regardless of value). So, if the person did not own any real estate and had total assets worth less than $100,000, probate is not required (though it is still permitted).

It is worth noting that the fact that a person was married at the time he or she passed away does not mean that probate is not required. A surviving spouse does not automatically inherit the property of the deceased spouse. Because Idaho law permits a married person to leave his or her property to a child, a friend, or a charity, the law requires that a probate occur to determine who is really entitled to inherit the decedent’s property even when there is a surviving spouse.

On the other hand, a married couple who sets up a Living Trust will normally avoid the necessity of two probates, one when the first spouse passes away and a second one when the other spouse dies.

Besides setting up a Living Trust, there are a few other ways to avoid probate. The property can be set up with a joint tenancy or a life estate form of ownership. Bank accounts and securities investments (stocks and bonds) can designate a “payable on death” beneficiary. A married couple can sign a devolution agreement. Or the property can be given away to friends or family prior to death. Unfortunately, each of these alternatives usually have significant adverse tax or other implications. A person should confer with an attorney before deciding to use one of these options in order to avoid probate.

How Lengthy and Expensive is Probate?

How time consuming is the probate process? Although the Executor has the option to distribute some of the decedent’s property earlier, by law the probate cannot be completed and closed up until at least six months after the decedent passed away.

How expensive is the process? While it may vary depending upon the attorney involved, the magnitude of any creditor claims, and disagreements which may arise between the heirs, probate can run anywhere from about $1,500 to many thousands of dollars. Court filing fees and the cost to publish a Notice to Creditors will add about $200 to that figure. On top of that, the Executor is also entitled to “reasonable compensation” which will vary depending on the amount of time that he or she is required to spend on the process. And for married couples, these numbers are doubled because of the requirement of a separate probate as each spouse passes away.

Advantages of a Living Trust:

For most people, the best way to avoid the time and expense of probate is to create a Living Trust. As added bonuses, a Living Trust will also:

• Reduce or eliminate any state or federal estate taxes that your family and heirs may be required to pay on the inheritance that you leave them.
• Guard the privacy of your financial affairs.
• Permit you to decide who will manage your affairs in the event that you become physically or mentally disabled.

One final comment: If you own real estate in more than one state, the importance of avoiding probate increases. If you don’t take the time to set up a Living Trust and move your real estate into the Trust, when you pass away your heirs will be required to go through a probate here in Idaho. Then they will have to do an ancillary probate proceeding in every other state where you owned real estate. The total costs they are required to pay can increase dramatically.

For a more in-depth look at the details that may be included in your Will or Trust, click HERE or on the “Q & A” Tab at the top of this page.