Probate is a legal process that is necessary when you transfer assets through the terms of a will. In New York, the Surrogate’s Court has jurisdiction over estate matters. This court also provides supervision when someone passes away without any estate planning documents at all.
It should be noted that there is a simplified probate process in New York for small estates with a gross value of $50,000 or less.
When you are planning your estate, you should definitely have some understanding of this process. In this post, we will share four key points that you should understand before you make any decisions.
Probate is time-consuming.
It can seem like a will is a very simple document that will facilitate quick and easy asset transfers. In reality, this is not the case, because the executor of the estate is required to admit the will to probate.
Creditors of the decedent are given seven months to come forward seeking satisfaction, and it takes time for the executor to prepare the assets for distribution. There can be additional complications if there are any challenges to the validity of the will.
No inheritances are distributed while the estate is being probated by the court, so the inheritors must play a waiting game.
Probate expenses can add up.
Probate is not free. There is a filing fee that is based on the value of the estate, and the executor is entitled to remuneration. Sometimes the executor will bring in a probate lawyer, and a tax accountant may be engaged.
There are expenses related to liquidation of property, and various incidentals will invariably enter the picture. All of this red ink reduces the value of the estate before it is distributed to the heirs.
Probate is a public proceeding.
Most people like to keep their financial affairs confidential, and this would extend to the way your estate will be transferred after you are gone. In addition to the general loss of privacy, the information can potentially cause hard feelings among interested parties.
Probate is a public proceeding, so the records are available to anyone that has an interest.
Some transfers are not subject to probate.
The probate requirement does not apply to every type of asset transfer. Life insurance policy proceeds are transferred outside of probate, as long as the estate is not the beneficiary. As long as the beneficiary of an individual retirement account is not the estate, that transfer also would not be subject to probate.
Transfers to payable on death account beneficiaries are probate-free, and this applies to property that is transferred through joint tenancy with right of survivorship.
You can proactively implement a probate avoidance strategy.
The negatives of probate can be avoided if you plan your estate the right way. If you utilize a revocable living trust instead of a will as your estate plan centerpiece, you would act as the trustee while you are living.
You still control the assets, so there are no worries on that level. After you pass away, the trustee that you choose to succeed you would distribute the assets to the beneficiaries. The transfers would not be subject to the probate process.
This is one major benefit, but there are others that we are going to cover in the near future. Suffice to say that a living trust is a very versatile and effective estate planning tool that is ideal for a wide range of people.
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