Why you should plan your estate?
A surprising number of people don’t bother planning what to do about the assets they own when they pass away. Not leaving a will or other means of determining how your assets should be distributed may not concern you if you have already died, but it can be a nightmare for those you love and who could have been your beneficiaries. The more you own, the more difficult it can be for anyone to sort out who should inherit what you have left behind. The answer is to plan your estate well before you become so incapacitated that it becomes too difficult to do. It’s also a good idea to familiarize yourself with the procedure after you die. There are ways you can minimize confusion and stress and ensure that as much as possible of what you leave behind goes to those you want to inherit it. Part of planning an estate well is to understand what happens during probate and why it makes sense to reduce the amount of assets that are classified as probate assets.
Probate and probate assets
In Massachusetts, probate is the standard procedure that is initiated after anyone dies. When someone dies, their will, if they have made one, is verified in a court-managed process. A personal representative is appointed to administer the will and a period of time is allocated so that any claims on the will can be heard by would-be beneficiaries. Valid creditors can also recover any debts owed to them and state and federal taxes paid. If no will and testament was made, then the court will distribute the assets of the decedent according to the state’s laws of intestacy. This still requires a period of probate before the distribution of assets is made in a hierarchy of beneficiaries determined by state intestacy rules.
Probate can be costly and time consuming. It can be a frustrating experience for potential beneficiaries who ultimately stand to lose a greater percentage of what they could have inherited if a more careful estate plan had been executed by the decedent before death. Estate lawyers can help you avoid holding on to what are regarded as probate assets so that these assets can be distributed to intended beneficiaries faster and at a lower cost after death.
So, what are probate assets?
Probate assets are basically all assets that are owned only by the decedent. This includes things like:
- property that was owned only by the decedent;
- bank accounts that are held in only the name of the decedent;
- furniture, boats, cars or any other personal items that were owned solely by the decedent;
- life insurance or brokerage accounts that are in the name of the decedent only, or the decedent’s estate.
Because these assets all have the same thing in common, i.e. are owned solely by the decedent, they must be processed through probate and distributed according to the will or according to intestacy rules as has been mentioned above.
How can these assets avoid probate?
Non-probate assets, i.e. assets that do not have to go through probate, can be distributed as soon as can be practically arranged. Non-probate assets include the following:
- property held in joint title where survivorship rights have been established;
- bank accounts that are held in joint name or payable on death to named beneficiaries;
- property or assets held by a trust set up before death;
- life insurance and retirement accounts that have already stated the name(s) of beneficiaries other than the decedent’s estate.
Non-probate assets are typically transferred to the other joint account holder, joint owner, trust beneficiary, life insurance or retirement account beneficiary after death without having to wait for probate to be completed.
Estate planning to avoid probate assets
A balanced, well executed estate plan will attempt to convert any assets which are held in the sole name of the owner and therefore likely to be considered probate assets into some form of non-probate assets so that probate can be avoided as much as possible. Part of planning one’s estate is appointing an executor or personal representative who will be in charge of distributing one’s assets after death in accordance with the will.
If most assets have not been converted into non-probate assets, then the executor will have no alternative than to wait for probate to be completed. This process typically takes up to a year, but depending on how complicated any claims on the estate become, arguments over debts, etc. could take longer. Everything that has to be completed as a result of probate may involve some sort of cost and this will ultimately be deducted from the combined value of the assets to be distributed, resulting in a loss of inheritance by the beneficiaries as well as experiencing the frustrating delay.
Note that Massachusetts does have a simplified probate process available, but this is typically for estates that are less than $25,000 in total value. In the case of simplified probate, all the executor has to do is to file the will, the death certificate and a list of other information regarding the relationship the executor has with the decedent and pay a fee. There is a 30 day waiting time for this to be processed, but after completion, the assets can be distributed according to the will.
For more information, visit our website Mucci Legal or contact us for a free legal consultation today.