Blog Post by Keith R. Butler
A frequent goal of the estate planning process is the avoidance of probate. Most people have some vague knowledge of probate or the probate process, but other than those who have firsthand experience, perhaps serving as a personal representative, they probably aren’t too sure what it really is and why so many folks strive to avoid it.
Probate is a legal action commenced at the county level for court supervised disposition of probate property, administration of claims against the deceased’s estate, and payment of debts and expenses. This process rarely takes less than 9 months or so, and frequently much longer, depending on many factors such as complexity of assets and the nature of claims against the estate.
The court only administers, and a Last Will only applies to, “probate property.” What is probate property? All property owned by the deceased that is not non-probate property, which is easier to define. Non-probate property, which is property that vests in another by operation of law upon the owner’s death, can take many forms, such as:
- Titled jointly with rights of survivorship. (Property held as “joint tenants” qualifies, but not property held as “tenants in common,” which means that each owner can dispose of his or her share as he or she pleases upon death.) This includes survivorship marital property, which is essentially a joint tenancy between husband and wife in Wisconsin.
- Property subject to a beneficiary designation (unless the beneficiary is the estate), such as:
- Life insurance
- Tax deferred qualified plan assets, such as 401(k), profit sharing, SEP plans and IRAs
- Accounts held with a POD (pay on death) or TOD (transfer on death) designation.
- Property held in trust, which is disposed of upon death pursuant to the terms of the trust.
- Property disposed of pursuant to a “Washington Will,” which is a provision in a marital property agreement between husband and wife in Wisconsin that directs the transfer of property upon death of either spouse outside the probate process.
Property that is owned by the deceased but without some mechanism making it non-probate as provided above is probate property and thus subject to the probate process. A probate is avoided if there is no probate property. Thus, avoiding probate is accomplished by classifying all assets as non-probate.
Why does one wish to avoid probate? The time and expense involved. As noted above, the process takes at least 9 months, because notice to creditors must be published, even if there are none or they will be paid in full. Creditors are given a deadline several months from the commencement of the probate to file a claim. Then, tax returns must be filed, and the probate may not be closed until tax clearance is received from the Wisconsin Department of Revenue, indicating that the state is not owed any money by the deceased. The Department is rarely as eager to close a probate as the parties involved, so they are in no particular hurry. Also, even a simple probate will cost thousands of dollars in attorney’s fees, simply because of the paperwork and court appearances needed.
Are there circumstances when one would want to have a probate? Yes. Generally speaking, the situations involve having a court supervise and issue orders to remove uncertainty and instruct the personal representative as to what to do, and thus protect the personal representative from liability. This may arise if there are complex debts, or claims by creditors that the family wishes to challenge. Another case is when there may be disputes among the heirs, and having a court involved will give direction and certainty to the actions taken. There may be other situations where court supervision is advisable.
Lastly, there are statutes allowing settlement of small estates. If the deceased has left no more than $50,000 worth of probate property, an heir can sign and present to the custodians of the deceased’s property an affidavit to that effect, promising to dispose of the assets properly and pay all debts. There are other summary processes available for small or insolvent estates.