Your Probate Questions Answered
Probate is a court process where the estate of a deceased individual is administered so that creditors are paid, assets gathered, and property is distributed to the rightful heirs and beneficiaries. Probate may be confusing for many people, so here are your probate questions answered.
In Probate, someone dies “intestate” if they died without a will. If someone dies without a will, his or her distributable assets pass to certain family members in accordance with Michigan laws. If someone has a will, they can name anyone that they want to receive their assets, so long as the person is able to do so and was not influenced. In Michigan, “small estates” (i.e. an estate valued at $23,000 or less in 2019), can utilize an abbreviated and easier process.
Probate can be costly and time-consuming
The probate process, which often lasts six months to a year (or more), can cost thousands in legal fees. Fees are paid from the estate. Probate proceedings are usually open to the public, so there is little privacy involved.
Ways to avoid probate
A proper estate plan is affordable and will usually include durable and health care power of attorney that will assist your loved ones in caring for you if you become incapacitated (either temporarily or permanently).
Some of the mechanisms that can be used to avoid probate include:
- Certain assets automatically avoid probate. Jointly owned real estate, if properly titled, may pass to the other owner. An IRA, 401(k) or life insurance policy usually has a named beneficiary. Pensions may have rights for the surviving spouse.
- A person may transfer ownership of property during their lifetime, a move designed to ensure that it is not included in their estate upon their passing and therefore is not subject to probate. The decision to gift property in this manner, otherwise referred to as making an “inter vivos gift,” can present certain gift and income tax considerations that must be examined carefully. Furthermore, once an inter vivos gift is made, it typically cannot be reclaimed.
- Payable on Death (POD) or Transfer on Death (TOD) accounts enable funds to be paid out to a named beneficiary upon the passing of the account holder and bypass the probate process altogether.
- Another way to exclude assets from probate is to have a trust. Trusts can be irrevocable or revocable. If revocable, a person has the opportunity to make changes or cancel at any time. Irrevocable trusts generally cannot be changed. Avoiding the cost and time of probate, is one of the main reasons that people establish a trust so it’s best to hire an attorney to help with this complicated process. Trusts – especially those of considerable size – are tricky and should not be done without a lawyer.
For more than 30 years, southeast Michigan residents have relied on the estate planning and probate attorneys at O’Reilly Rancilio in Sterling Heights. To have your probate questions answered by an attorney, visit our website for information.