What is Probate, and Why is it Important?
The question above is commonly asked, and yet to answer it we must first break the question down into parts. As such, the first question to ask is, what is probate? According to the American Bar Association, it is “the formal legal process that gives recognition to a will and appoints the executor or personal representative who will administer the estate and distribute assets to the intended beneficiaries.” From there, things can diverge from state to state. During probate in Florida, the decedent’s assets generally pay for the proceeding’s cost, the decedent’s funeral expenses, and any outstanding debts, with the remainder distributed amongst the various beneficiaries. Furthermore, the proceeding only applies to probate assets, which are those that are owned solely by the decedent at death, or by the decedent and one or more co-owners without a provision for automatic succession of ownership at death. So, for example, a life insurance policy payable to the decedent’s estate is a probate asset, whereas a life insurance policy payable to a beneficiary is not.
Where things become more interesting is when considering what is deemed a probate asset. Firstly, if there is a valid will, it will be admitted so the court can transfer the assets listed therein to the named beneficiaries. If there is no will, a probate procedure might be necessary to transfer the probate assets to those entitled to them under Florida law. In Nevada, the procedure for when a will is lacking or invalid is called Administration. Moreover, in Nevada, if the value of assets exceeds $20,000 or real estate is involved, then probate will be necessary to distribute the assets. There are various exceptions to these guidelines, depending on the circumstances of each case. These exceptions are not available to pay debts, and it is the attorney’s responsibility to identify these assets to the court.
Of course, there are some elements of probate that make it cumbersome, or even undesirable. Creditors can access your assets, and there are no tax benefits. Furthermore, the probate process can be lengthy, particularly if there are complications. The possibility of challenges is also present, which is probably the last thing you would want your loved ones to have to deal with. And on top of everything else, the entire process is public for all to see. Surely, there must be a better way…
And there is. Probably the best example is trusts, which are subject to probate only in the sense that the court will see that there is a trust, and set it aside. The trust remains private, and, depending on the type of trust, is shielded from creditors. The assets are passed to the trustee(s), who is/are tasked with distributing the assets to the named beneficiaries. Some trusts even offer tax advantages. Perhaps the most beautiful part of trusts is their flexibility. They can take multiple forms and serve various purposes, and if done correctly can truly set up the decedent’s loved ones in the best possible way.
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