Probate can take time and money — but with the right documents in place, it’s possible to avoid probate entirely. For eligible Haven Term policyholders, an option is free estate planning services from Trust & Will, through our Haven Life Plus bonus rider.
We asked Patrick Hicks, legal director at Trust & Will, to help explain how to minimize or eliminate probate costs.
“Trust & Will can help by providing access to the creation of a trust that, when executed properly, can help your estate avoid probate,” Hicks told us. “If you have to go through probate, Trust & Will can help you with the process with a variety of service options from do-it-yourself tool-assisted probate, to dedicated concierge step-by-step support, to a fully licensed attorney doing the whole process for you.”;
Eligible Haven Term policyholders can create an individual or couple trust or will with Trust & Will at no cost. Whichever option you choose, having the right documents in place can make life easier for your loved ones—and can be one of the best gifts you can give.
What is probate?
Before understanding how you can use services like Trust & Will to minimize probate costs, it’s important to understand what probate is.
“Probate is a court-supervised procedure that verifies your will, if you have one, and authorizes your named executor so that person can distribute your property and belongings,” explains Hicks. “During the probate process, your assets must be located and valued for total value. Once that is done, taxes and debts are paid and the remaining value of the estate is distributed.”
Creating a will is easy – in many cases you can create a simple will online in less than an hour, not including the witnessing and notarization process – and it’s one of the essentials of modern estate planning.
But if you don’t take any extra steps beyond simple will preparation, your estate will likely go through the probate process after your death — which can cost your loved ones both time and money.
How much does probate cost?
What is probate likely to cost – and who pays for it?
“Prosthetic costs vary,” says Hicks. “It depends on attorney fees, executor compensation, probate, court fees and creditor notification fees.” Generally speaking, Hicks estimates that probate will cost 2.5% of the value of the estate, which of course can add thousands, even tens of thousands, of dollars to the total.
The cost of probate generally comes from the total value of the estate, and your loved ones are never responsible for paying probate fees directly. But any money that goes into probate comes directly from your loved ones’ inheritance – and if the value of the estate is less than the cost of probate, your estate could be declared insolvent.
Fortunately, there are many ways to keep probate costs low. For example, Trust & Will offers simple online probate services to guide people through what can otherwise be a complicated and confusing time. “Settlement starts at just $600 plus administration fees through Trust & Will,” Hicks told us — so keep that in mind as you continue the estate planning process.
Even if your estate has more than enough money to cover the costs of probate, it’s a good idea to learn how to avoid the costs of the probate process. When you’re building generational wealth, every penny counts – and the fees associated with probate can reduce the financial resources and assets passed down to the next generation.
How long does the will take?
How long does it take to complete the probate process? In many cases, the process takes around six months – but in more complicated cases, probate can take a year or more.
“Protests can take different lengths of time,” Hicks explains. “With small properties, the average time to complete the probate process can be less than six months.” That said, many people should expect the process to take at least six months. “Six to nine months is not unusual, if everything is seamless and no one tries to contest the will.”
If a descendant or beneficiary tries to contest the will, expect probate to take longer. Complicated probate situations can take a year or more to resolve – meaning your loved ones may have to wait a long time before receiving their inheritance.
“In complicated or contentious situations, the process can take years,” Hicks told us. That’s another reason why it’s a good idea to learn everything you can about simplifying or avoiding the probate process.
Is it possible to bypass the probate process?
There are many ways to minimize the costs of probate – and some ways to bypass the probate process entirely. “You can avoid probate by establishing a living trust,” explains Hicks, “or by giving assets to loved ones while you’re still alive.”
Distributing assets to family members while you’re still alive is one of the easiest ways to ensure that your financial and material resources—cash, property, business ownership—go to the people most likely to benefit from them. Be aware that certain types of gifts, including large cash gifts, may come with tax liabilities – and consider discussing any distributions with a CPA or attorney before making the gifts to your loved ones.
Setting up a revocable living trust is another great way to manage your estate, especially if you hope to maintain control of your assets until you die. As the name suggests, a revocable trust can be changed – or revoked – at any time while you’re still alive.
When you create a revocable living trust, you specify how you want specific assets to be distributed – and after your death, the assets in the trust are distributed accordingly. This allows you to transfer cash, real estate, inheritances, investments, business ownership and other gifts to loved ones without going through a costly, complicated or unnecessary probate process.
There are a few more ways to avoid the complications associated with probate – although not all of these options allow you to bypass probate entirely. Keeping your estate small, for example, can simplify the probate process for your descendants and beneficiaries. Creating joint title to a family home – either with a spouse, partner or grown child – is another great way to manage assets while avoiding probate.
You can also set up a “pay on death” bank account, often called a POD or a Totten Trust. This type of account allows you to set aside a sum of money that is paid out, on your death, to a designated person – and gives you another way to transfer assets without the hassle of probate. Taking the time to plan your estate in a way that avoids the costs of probate is one of the best gifts you can give your loved ones. Think of it as a way to pass on not only generational wealth, but also generational health – in the form of less stress, less anxiety and an easier transfer of assets from one generation to another.