In all the years of planning and administering our clients’ estates, I have found that the concept of the probate process seems to puzzle and confuse clients. In planning our clients’ estates we look for ways to reduce the need for probate, both during their life, and at the time of their death.
What is probate? For minors without parents, and someone still alive who is or becomes unable to manage their personal affairs, they may have need for the appointment of a guardian and or conservator to protect them physically and to protect and manage their finances. For someone who has died, the appointment of a personal representative (previously referred to as an executor or executrix) is made to settle their affairs. Both types of appointment, for someone alive or a deceased person, are made and supervised by the probate court.
Why do we need a probate process? Clearly, for those individuals who lack the legal or mental capacity to manage their affairs, the appointment of someone to protect them physically and financially represents an important public interest. For those who have died, it is important for their heirs and their creditors that there be a process to make certain that the personal representative appointed gathers their assets, pays their rightful debts and taxes and then passes the remaining assets to their spouse, children, or others in accordance with their will, if there is one. If there is no will, then the personal representative needs to follow the court’s orders to distribute the remaining assets. If there are minor children and no surviving parent the court will then be asked to appoint a guardian and conservator to care for the children, and manage their assets until they are distributed to the children when they reach the age of eighteen. If there is a will, the guardian and conservator will usually be nominated in the will. Probate also serves the purpose of establishing and protecting lines of ownership to registered property, especially real estate.
How can we avoid or reduce the probate process? Probate, other than the appointment of guardians for minors can largely be avoided. Since the probate process involves time, court costs, and fees for attorneys, all of us would be wise to find ways to reduce or avoid the process for our estates. This starts with understanding the concept of non-probate assets, those assets that are not subject to probate administration. Non-probate assets are those assets payable to a named beneficiary (like a life insurance policy), with a payable on death (POD) or transfer on death (TOD) registration clause, and assets owned by a trust or in joint tenancy. Conversely, probate assets are those assets registered solely in the name of the deceased. Ideally, we want all or most of our assets to be non-probate assets at our death to avoid or minimize the process. Minnesota, and many other states, have provided for reduced or alternative means of dealing with probate assets. Estates with $50,000 or less in total value may be eligible to use what is referred to as an “Affidavit of Collection” allowing a responsible person to collect those assets, and pay or reimburse expenses of last illness and funeral. In other instances, where the assets exceed $50,000 in value, the estate may qualify for “Informal Administration” which still requires certain formalities, but may allow the family of the deceased to avoid any court hearings and detailed accountings. In each case it should be noted that whether probate is required or not, there is still likely to be required tax and other work to be done by professionals. In any case, reducing or avoiding probate starts with carefully planning your estate including properly drawn wills, trusts, and powers of attorney. Feel free to contact me if you have any other questions regarding the probate process, estate planning, or other legal issues.