Over the years, many of my clients have asked me how to avoid probate. They believe it must be avoided to simplify their affairs when they pass to the great beyond. The reality is that probate in many states, such as Pennsylvania, is not as expensive or time consuming as some would have you believe.
Probate is the process by which a deceased person’s assets are passed onto beneficiaries either through a Will or the laws of intestacy (rules as to who inherits when there is no Will). The Will is admitted to probate and the executor is officially appointed to handle the affairs of the estate. Documents associated with probate are recorded at Pennsylvania’s Register of Wills office in the county where the deceased resided.
In some states, probate can be time consuming and expensive. California is famous for its residents trying to avoid probate. Revocable trusts, often called Living Trusts, are the document of choice for Californians to pass on their assets to beneficiaries in the hopes of avoiding probate. Out of states like California and Florida, an industry arose that promotes the use of Living Trusts to avoid probate, advertising that time and money can be saved by using these trusts.
Each state is very different when it comes to their probate process. Many states have a probate process that can be resolved quickly, even without the use of an attorney. Pennsylvania does not have an expensive probate process and the time for resolving probate is about a year. So, California’s practice of using Living Trusts is not a national practice. Where you live and what you want to accomplish with your estate plan will determine whether you need a Living Trust.
The costs settling your final affairs do not vary significantly when using a Will versus a Living Trust in Pennsylvania. Pennsylvania’s inheritance tax is due on all assets (except for life insurance), whether passing through a Will and probate, a Living Trust or beneficiary designations. Probate costs charged by the Register of Wills are not substantial and attorneys will often charge the same fees for probate and trust administration.
The work to administer and settle a trust is about the same as the work to settle an estate with a will. After valuing the assets, paying the debts and taxes, the assets of either an estate or trust are usually liquidated. The beneficiaries receive an accounting and sign a settlement agreement for their inheritance.
Saving time and money on administration of someone’s affairs after they have passed is dependent on factors other than the document used to distribute their estate. Are the assets complex (multiple real estate holdings) or simple (cash accounts)? Are there issues with the beneficiaries, such as conflicts? And how well are the documents drafted, including provisions for dealing with unique beneficiaries such as minors or those receiving government benefits?
Trying hard to avoid probate will not guarantee that your affairs will be resolved without issue after you have left us. Getting the proper plan in place and naming the right people to follow your plan are more important considerations.
