Before we explain it, let’s first define it. What is probate? Probate is the legal process many families must go through with the court to settle the estate after someone dies.
1. The difference between a will and a trust and which one avoids probate?
Picture this: you’re with a friend, next to a waterfall, and you decide you want to jump in and go over. Fair warning: you’re not going to survive.
In scenario A, you keep your wallet, keys, phone, etc. in your pocket with a note to give your family a call if items are found and jump right in. Later, your family has to go into the police station, fill out paperwork, prove they’re related to you, and potentially pay a handling fee. The police will then hand over your items.
Scenario B, you hand your stuff to a friend before you jump. Your friend then hands your stuff directly to your next-of-kin afterwards, and your next-of-kin is able to immediately use your phone, cancel your credit cards, and move your car.
Scenario A is a will. Scenario B is a trust. A trust essentially serves as your imaginary friend, who holds on to your stuff for you and then hands it on according to your instructions, while creating a will is akin to filling out some of the required paperwork in advance but then having your family go through probate to make sense of that paperwork and have it approved. In both cases, your next-of-kin is having a really bad day, but in many situations, Scenario B is easier to work with. This is, of course, an imperfect metaphor— in practice, there’s a lot more paperwork involved in both scenarios.
2. Probate’s not that bad….except when it is.
Most people either 1. have absolutely no idea what probate is or 2. think that probate is essentially the eighth circle of hell. It’s not, but it is a bureaucratic process that involves a lot of filling out forms and waiting for things to happen. In a simple situation, such as the estate of a single person with one adult child, with absolutely no debts and only a single, very large bank account, probate is a relatively simple process.
Even when it’s simple, though, it will likely take at least a year to complete, will not allow your child immediate access to the funds in your bank account, and will cost your child several hundred dollars, likely more, in fees. However, add in factors like debts, complicated family relationships, a small business ownership, a next-of-kin who isn’t well organized on the best day, let alone after losing a family member, a minor child inheriting money directly, or limited liquid assets, and the process rapidly becomes less and less simple (and more and more expensive).
3. You can do more while you’re alive to make things easy for your family than you can after you die.
Obviously. But some of the things you can do while you’re alive can make your family’s life after exponentially easier. For example, if you own a business, do you have a plan in place for your death? If not, your family might have trouble running the business after you pass away. During your lifetime, you can change your beneficiary designations (and review them periodically to make sure they’re correct), but after you pass away, those can’t be altered. For most people, estate planning pays for itself quickly, and is a way to make sure that your family member has time to grieve.
A significant number of our estate planning clients come to us because they’ve lost a parent and had to deal with the probate of that parent’s estate. They want options on how to avoid a similar situation for their own children. If you have living parents, talk to them about their estate plan. Even putting together a list of assets can make a large difference to a grieving spouse, child, family member, or friend who is trying to discover and organize your assets.
Most people’s first choice is to avoid going over that waterfall in the first place, but there are only two certainties in this world: death and taxes, and probate often combines those. At some point, there’s no way for most of us avoid finding ourselves in a scenario like the ones we’ve described, whether you’re the decedent, the friend, or the family. For something universal, the process isn’t as easy as you might think it should be, but we’re always available to help.
Call (703) 687-6188 or email firstname.lastname@example.org us today for help navigating this complex process.