Why a Will isn’t Enough — the Process of Probate

Many people believe that once they have their Wills in place, they’ve done a majo­rity of their estate planning duty. Unfortunately, this is far from true — there is so much more to estate planning than just creating a Will. While we can’t go over all estate planning concepts in one article, we will review the reason a Will isn’t enough.

A Will can be created with the help of an attorney or by one’s self. In some states, a holo­graphic, or handwritten Will may be accepted as well. Sometimes there can be several versions of a Will written over the years, with confusion as to which might be the most current and reflective of the deceased’s intentions.

Because a Will can be such a tentative document with such a big responsibility, a process called “probate” has been created to vet the accuracy of the Will. All Wills must go through probate before its instructions can be carried out.

Probate involves state courts reviewing the Will and making sure it is the most current version. It also involves clearing any creditor claims and outstanding debts, as well as resol­ving any potential disputes between beneficiaries. Once everything has been filed and reviewed and cleared, the executor of an estate is then free to distribute the assets according to the Will’s instructions. But not before.

People tend to gloss over the probate process because they don’t realize how expensive and time-consuming it can be. But if ignored, there is a chance of hard-earned money going to Uncle Sam or lawyers rather than to one’s own kids and family. We’ve already paid taxes when we earned our income, property taxes, capital gains taxes, gift taxes, possibly estate taxes, and now we have to pay for probate? It seems quite unfair, especially since the cost of probate can range from 1 to 7% of the assets of the estate, depending on the state of residence of the deceased. States like New York can be much more expensive to probate than New Jersey. For example, in New York:

• For estates over $30k, the cost is anywhere from 2-7% of estate’s value (2-5% for executor/attorneys, and court costs upto $1500 or more).
• Many lawyers charge $3000 just to prepare basic court documents (ex: LETTERS TESTAMENTARY). Complexities that will bump up that price include problems with the Will, errors on the death certificate, notifying multiple parties, and numerous court appearances.
• Another $3000 or more if LETTERS OF ADMINISTRATION are needed (ex: there is no Will or executor). A Bond may also be needed to cover possible lapses in fiduciary duty.
• Another $3000 + 6% value of the estate to SETTLE it estate (ex: set up estate bank account, collect and liquidate assets, pay debts, file all final taxes).
• Another $3000 to CLOSE the estate.

Probate can also take some time and delay the period from date of death to date of distribution of assets. Sometimes it can be done in 4 to 6 weeks, sometimes it can take 6 months to a year, depending on the complexities of the estate.

Although a Will is not enough to avoid probate, various other techniques can be used to title assets in a way that bypass probate and allow the assets to go directly to the benefi­ciaries. Life Insurance, Family Limited Partnerships, Trusts (especially Revocable Trusts), Transfer on Death and Beneficiary titling are some of the most common ways to do so. Now that you know how costly probate can be, you may want to talk to your Estate Planning attorney or Financial Advisor to learn more about how you may be able to implement these strategies.