Common Misconceptions About Probate and Estate Planning

It is not uncommon for a potential estate planning client to make a comment that they need to have a will done in order to avoid probate. Wills do not avoid probate. Even so, probate is not generally “a bad thing.” Probate is simply to settle the decedent’s debts and the lawful transfer of the decedent’s assets in accordance with the decedent’s wishes pursuant to a will or according to the intestate statute if the decedent does not have a will. With certain family dynamics or in cases where there are minor children, probate is oftentimes a good thing because with probate there is a judge who is monitoring and making certain that the personal representative is doing his/her job, and not taking assets that are not his or hers.

Hypothetical 1:  Sam has a will that states everything passes equally to his two children. At the time of Sam’s death, there was a transfer on death deed that automatically transferred the homestead to his children immediately upon his death, and his retirement accounts passed to his children pursuant to his beneficiary designations as did his life insurance. He had $20,000 in a checking/savings account, and a $15,000 car in his name.

Sam’s assets will not have to go through probate. The only probate assets (those that pass to the estate through a beneficiary designation or via a transfer on death deed, joint ownership with rights of survivorship or via beneficiary designation) are his $20,000 checking/saving account, and a $15,000 car. Since the total of those assets are less than $75,000 and does not include real estate, probate does not need to occur.

Hypothetical 2:  Sam has a will that states everything passes equally to his two children. At the time of Sam’s death, his retirement accounts passed to his children pursuant to his beneficiary designations as did his life insurance. He had a home in his name, $20,000 in a checking/savings account, and a $15,000 car in his name.

Since there is real property in Sam’s name, probate must occur. The only way to transfer real property that does not have a right of survivorship, a transfer on death deed or is owned/funded by a trust is through probate court.

Hypothetical 3:  Sam has a revocable trust and a pour over will that states everything passes equally to his two children. At the time of Sam’s death, none of his assets, including his home, retirement accounts, checking accounts, car, and life insurance were in the name of his revocable trust (note: not all items can be transferred into a revocable trust), nor did Sam have beneficiary designations on his assets.

Probate will need to occur because the only way to lawfully transfer the assets under this hypothetical is through probate.

Spangler and de Stefano, PLLP assists business owners and individuals with their estate planning needs.

The material contained herein is for informational purposes only, and is not intended to create or constitute an attorney-client relationship between Spangler and de Stefano, PLLP and the reader. The information contained herein is not offered as legal advice and should not be construed as legal advice.