Taking Care of Mom and Dad: Avoiding Probate
Probate is the legal process that oversees the distribution of your parents' possessions after they have died. It is the way to assure that their wills are valid, that their debts are repaid and that their assets go to the right recipients. Probate is usually a long and tedious process. And, just like anything that is long and tedious -- and requires attorneys -- probate can be very expensive.
Expect to pay between 6 and 10 percent of your parents' estate in probate costs, attorneys' fees and executor's fees. If their estate is worth a modest $200,000, probate can cost as much as $20,000.
Probate is initiated in the county of the dead person's legal residence. Usually, the first step is taken by the executor or other interested person who's in possession of the will. This person files (with or without the help of a lawyer) a Petition for Probate of Will and Appointment of Executor -- or a similar standard form.
If there is no will, somebody must come forward and ask the court to be appointed as administrator, instead of an executor. Most often, this is the surviving spouse or an adult child, although it might also be another interested party.
There is a common misconception that a will can be drafted in a manner to avoid the probate process completely. This is not possible. Specific assets can avoid probate...but some form of the process must take place for every estate. There are usually streamlined -- and in some places highly expedited -- procedures set up by the local court system to handle the settlement of small estates, or even larger ones, if uncomplicated.
The probate procedure involves three basic steps:
- collection, inventory and appraisal of all assets that are subject to probate;
- payment of taxes and to creditors; and
- formal transfer of estate property.
The surviving spouse and/or children are generally allowed some inheritance under state law, whether or not there is a will. Generally, that comes off the top first. After that, the order of payment of claims against the estate is usually:
1) costs/expenses of administration;
2) funeral expenses;
3) debts and taxes; and
4) all other claims.
What remains of the estate after these payments are made is available for distribution to heirs and beneficiaries.
