Probate is a legal process that takes place after someone dies, where their assets are distributed among beneficiaries according to their last will and testament or the rules of intestacy. Despite its importance, there are many misconceptions surrounding the probate process that often lead to confusion and misunderstandings. In this article, we’ll explore ten of the most common probate misconceptions and clarify the facts.
What does probate involve?
Probate is the legal process of administering the estate of a deceased person. This involves identifying and valuing their assets, paying any outstanding debts and taxes, and distributing the remaining assets to their beneficiaries according to their will or the intestacy rules. Probate ensures that a deceased person’s estate and assets are administered and distributed properly.
1. Probate is Always Expensive
One of the most common probate misconceptions is that it is always expensive. While it is true that some estates can rack up high probate fees, this is not usually the case. In some cases, probate fees are calculated based on a percentage of the estate’s value, which means smaller estates will have lower fees. Additionally, some assets qualify for a simplified probate process for smaller estates that reduces fees and speeds up the process. At Boyletts Law we do not base our fees on a percentage of the value of the estate and instead, charge on the basis of the work involved at a fixed fee which is quoted upfront.
2. Probate is a lengthy process
Another common misconception is that probate is a lengthy process that can take years to complete. While it is true that some probate cases can drag on for a long time, this is not typical. The length of the probate process depends on various factors, such as the complexity of the estate, the number of beneficiaries, and whether the will is contested or not. In a large number of cases, probate will be completed within a few months.
3. Probate is only necessary for large estates
Many people believe that probate is only necessary for large estates, but this is not true. Even small estates with a few assets may require probate, depending on the policy of each financial institution. Probate is usually necessary to legally transfer assets from a deceased person to their beneficiaries, regardless of the estate’s size.
4. Probate avoidance is always a good idea
Probate avoidance is a popular strategy for many people, but it is not always the best idea. Avoiding probate can be expensive and complicated and may not always be necessary depending on the size and complexity of the estate. Additionally, some probate avoidance methods, such as joint ownership or gifting assets, can have unintended consequences that may end up causing more problems than they solve.
5. A Will avoids probate
Many people believe that having a will automatically avoids probate, but this is not the case. A will only dictates how the estate should be distributed, but it still needs to go through the probate process to ensure that the distribution is legal.
6. Probate can be avoided through joint ownership
Joint ownership is a common way to avoid probate, but it is not fool-proof. When assets are jointly owned, they automatically pass to the surviving owner after one owner dies, avoiding probate. However, joint ownership can have unintended consequences, such as exposing assets to the creditors and liabilities of the other owner or creating potential disputes between beneficiaries. Joint assets are also not automatically exempt from inheritance tax.
7. Probate can be avoided through gifting assets
Gifting assets is another popular probate avoidance method, but it can also have unintended consequences. Gifting assets can trigger gift tax implications, leading to potentially significant tax implications down the road.
8. Probate can be avoided through a trust
Trusts are a popular probate avoidance method that can offer many benefits, such as avoiding probate fees, maintaining privacy, and allowing for more control over asset distribution. However, trusts can also be complex and expensive to set up and maintain and may not always be necessary for smaller estates.
9. Probate is always contested
Another common probate misconception is that it is always contested. While it’s true that some probate cases end up in court, the vast majority of cases do not. Many probate cases are straightforward and uncontested and can be resolved without the need for litigation.
10. Probate is public record
Many people believe that probate is public record, meaning anyone can access information about the estate and its beneficiaries. While probate records are generally available to the public, some information can be kept private, such as the values of specific assets or the identities of minor beneficiaries.
The truth about probate
The truth about probate is that it is a necessary legal process that ensures a deceased person’s assets are administered and distributed legally. While probate can be expensive and time-consuming, there are ways to minimise these costs and speed up the process. Additionally, avoiding probate is not always necessary or advisable, and can have unintended consequences that may cause more problems than they solve.