Gregory S. DuPont
Advantages of Probate
Probate Definition: Probate is the formal legal process that validates a will and appoints the executor or personal representative who will distribute assets to the intended beneficiaries.
What is the legal responsibility of the executor of a will?
An executor is entrusted with making sure a person's last wishes are granted with regard to the distribution of their property and possessions.
The process of probate offers many advantages.
- Protection from creditors. When an estate has been probated and its assets distributed, no creditor can make a claim on the assets.
- Fair analysis of estate value. If heirs believe property has been overvalued in probate, thus increasing the potential estate tax, the lawyer or executor can bring in an independent appraiser to appear before the judge. The judge may approve the new appraisal or take a position between the independent appraiser and the court-appointed one.
- Protection from some taxation. An estate is a separate taxable entity and may provide opportunities to reduce taxes by shifting income to an heir or keeping it in the estate longer if the estate’s tax bracket is lower than the heir’s.
- Lower cost of legal counsel. It may cost more for legal counsel to draft a living (inter vivos) trust, which will bypass the probate process, than to draft a will.
Disadvantages of Probate
- Higher costs to the estate. Probate can be costly; fees are set by law, but they are for ordinary services. If the attorney does extraordinary work, the fees may be greater. The executor may also charge fees, and if the executor does not waive his or her fee, the actual cost to the estate may be double. The fees are based on gross, not net, values of the estate.
- Delay in transfer of assets. Probate is time consuming. Estate settlement often takes between one and two years. Furthermore, assets in probate often suffer from lack of management, or overly conservative management, during the settlement process. It often takes a month or more to receive court permission to sell an asset. Due to delays, an executor may not be able to respond to a sudden change in market conditions. Executors tend to be very conservative during probate because of their financial liability if they are judged to be less than prudent.
- Public knowledge of the estate. Probate is a public process; it gives unknown creditors an opportunity to make claims against the estate. For the probate process to work, the will must be a matter of public record.
Using these pros and cons as a guide, you can meet with your estate planning team to determine your best course of action in planning your estate—to either use or avoid the probate process.