The pros and cons of probate

How does the probate process fit into your estate plans? By using the pros

and cons outlined below, you can meet with your financial planner and determine

whether to use or avoid the probate process while planning your estate.

But first, here's an overview of wills, trusts and the duty of probate


The assets in your will ultimately fall under the jurisdiction of a

probate court, although most states have exemptions for smaller estates.

Probate court determines whether a will is valid and administers the estate

to ensure that all instructions contained in a person's will are carried


Assets in certain types of trusts can avoid the probate process. A trust,

which is similar to a will, is a written document dealing with the transfer

of assets and responsibilities. For assets in a trust to avoid probate,

the trust must be a "living" or inter-vivos trust, which means it isn't

a part of the will. Testamentary trusts are created at death by a will;

such trusts must be presented for probate because they are found within

the will itself.

It's important to recognize that probate laws vary from state to state.

To determine how probate could affect your estate plans, consider the

following pros and cons:

Advantages of Probate

* Protection from creditors. If an estate has been probated and its

assets distributed, the estate cannot be attacked by creditors seeking to

make a claim on the estate's assets.

* Fair analysis of your estate's value. If your heirs believe property

has not been properly valued in the probate process, thereby increasing

the potential estate tax, your lawyer or executor could bring in an independent

appraiser. The probate judge may approve a new appraiser 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 can provide opportunities to reduce taxes by shifting income to an heir,

or — if the estate's tax bracket is lower than the heir's — keeping it in

the estate longer.

* Lower cost of legal counsel. It may cost more for legal counsel to

draft a living trust than to draft a will.

Disadvantages of Probate

* Higher cost to your estate. Probate can be expensive. Laws in some

States may set fees, but they are generally for ordinary services. If the

attorney does extraordinary work, the fees can be greater. The executor

may also charge fees and, if the executor does not waive his or her fee,

the actual cost of your estate may double. The fees may be based on gross

values instead of net values.

* Delay in transfer of assets. Estate settlement in probate can take

up to one or two years, and assets in probate often suffer from lack of — or overly conservative — management during the settlement process. In

some states, it can take a month or more to receive court permission to

sell an asset, which means that an executor may be unable to respond to

a sudden change in market conditions. Also, executors tend to be conservative

during probate because of their financial liability if they are judged to

be imprudent.

* Public knowledge of the estate. Probate is a public process. For the

process to work, the law must be a matter of public record.

Zall, Bureaucratus columnist and a retired federal employee, is a freelance

writer based in Silver Spring, Md. He specializes in taxes, investing, business

and government workplace issues. He is a certified internal auditor and

a registered investment adviser. He can be reached at [email protected]


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