3/3 video probate

Probate Overview

• Role of Probate: Validates the will, organizes the orderly distribution of assets, protects creditors.

Key Aspects of Probate

• Validity of Will: Determines if a will is legally valid.

• Orderly Distribution of Assets: Ensures assets are distributed according to the will, pending debts being settled.

  • Contracts That Bypass Probate: Contracts with designated beneficiaries (e.g., annuities, life insurance, 401(k)s) transfer automatically upon presentation of a death certificate.

Creditor Protection

• Executors must ensure all creditors are paid before assets are distributed.

• This may require liquidating assets to satisfy debts (e.g., mortgages, loans, taxes).

Pre-Death Asset Distribution

• Assets given away before death are no longer part of the probate estate.

  • Example: If an asset is willed to one person but given to another before death, the gift must be honored, and probate does not cover it.

Advantages of Probate

1. Protection of the Decedent: Guarantees execution of final wishes and protection for minor children.

   • Ensures minor children are placed where intended, often involving guardianship considerations.

2. Protection for Heirs: Safeguards rightful heirs from disputes, especially in complicated family situations (e.g., remarriages).

   • Ensures assets are distributed correctly despite complex family dynamics.

3. Clear Transfer of Title: Ensures assets pass free and clear of debts.

4. Creditor Settlement: Ensures all debts are paid, providing heirs with clear ownership of assets.

Disadvantages of Probate

1. Time-Consuming Process: Can be lengthy, with potential delays in asset distribution.

   • May take months just to get an initial court date.

2. Costs: Legal fees can be significant, easily reaching tens of thousands of dollars.

3. Lack of Privacy: Probate records are public, allowing anyone to access details about the decedent’s assets.

Process of Probate

• Filing a Will: Begins with submitting the will to probate court; anyone can file for probate, not just relatives.

  • No need to be a direct beneficiary.

• Executor Appointment: If an executor is not named, the court appoints one to manage the estate.

• Asset Management: The executor must pay debts, taxes, and manage asset distribution.

• Redemption and Abatement: If significant assets are liquidated pre-death or not enough assets are available, distributions may be adjusted accordingly.

Contracts vs. Probate

• Contracts such as life insurance or retirement accounts will transfer outside probate based on named beneficiaries.

  • Common terms include:

    • POD (Payable On Death): Accounts transfer automatically to beneficiaries.

    • TOD (Transfer On Death): Assets transfer automatically at death.

Complications in Probate

• Relationships and legal statuses may complicate distributions (e.g., remarriages, common law marriages).

• Out-of-state issues can arise, further complicating probate processes depending on state laws.

Key Discussions

• Importance of having clear titles on assets to avoid complications (e.g., joint tenancies).

• Considerations for business ownership and the implications for property transfer upon death.

  • Key person insurance may be advisable to manage business interests after the death of an owner.

Conclusion

• Best Practices: Plan your estate comprehensively to avoid complications of probate.

• Seek legal advice specific to your state to navigate probate effectively.