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Tax Advisory Unit

Comprehensive Tax, Financial And Estate Planning

That Thing Called Probate – Part 1

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By Igor Krishtul, ChFC, EA

Probate is a big bad monster, right? Well, let’s see. Just like the living trusts, it has received a fair amount of publicity in the last several years or so. Some stories are outright frightening. Stories include the surviving family members going through the agony of probate and losing their family fortunes.

At the other extreme, there are folks claiming that probate is really good for your estate. They insist that the probate process actually protects the widows and orphans. Or something to that extent.

Every year, lots of money, real estate and other property go through probate. Their value is measured in billions. Obviously, whenever big bucks are involved, there are always many folks interested in getting their piece of the pie.

Probate is a legal process. It takes place in probate courts. These courts are also known by other names, such as surrogate. When a person dies, his individually owned property cannot be simply transferred to others.

If you want to get real technical, probate means proving that the decedent’s last will and testament (a will) is valid. In reality, it involves much more than that. First, the will is filed. At the end, the judge determines the validity of the will and OKs the final distribution of assets to heirs. There are, of course, various things in-between.

Many people die without wills. Even when people make wills, the paperwork may be lost, mutilated and even intentionally destroyed. Even without a will, the property left after death must still go through the probate process.

Dying without a will is called intestate. Here, the government bureaucrats determine how – and to whom – your assets are going to be distributed. It’s like having a probate judge writing your own will without your input.

If minor children are involved, the judges also decide who is to be their legal guardian. Without a valid will, your wishes cannot be conveyed to the judges in respect to this matter. Keep in mind that many lawyers make a comfortable living serving as guardians.

Whether a person dies with or without a will, the courts determine who is going to be in charge of the estate. In your will, you have the opportunity to name an executor. A female is referred to as “executrix”. This person must be approved by the probate judge. But, the judges must have a pretty good reason not to approve a person named in your will.

When you die intestate, the court appoints an administrator. When people die without wills, their voice can’t be heard in court. A family member and close relative may request such appointment. But, the courts are not obligated to choose among them. They can appoint outsiders. Having a friendly judge has helped many attorneys and law firms to build a fortune.

It would be unfair to assume that all probate judges are corrupt. But, even the most honest and ethical judges are frequently overwhelmed by many cases they must handle. There are also probate judges who are outright incompetent. In addition, no judge can really know all the nuances of the testator’s wishes.

Accordingly, many decisions made by the probate judges are not in the best interest of surviving heirs. Even worse, the court decisions may be contrary to what the testator really intended. So, in most cases the probate should be avoided whenever possible. Hey, why take chances?

Removing property from probate is not impossible. It is voluntary on your part. But, this removal can only be done while you are still alive. For this purpose, the dead can only be “heard” through the legal documents they leave behind.

Perhaps the most flexible and efficient document is a living trust. It can serve you well when you are alive. It can also be beneficial to your loved ones after death. But, having a living trust is not the only way to avoid probate. There are other ways permitted by law to achieve this goal. Some types of assets, however, are more appropriate to own in such a way that probate may not be avoided.

Many attorneys have a vested interest in the probate system. They feed their kids when your kids pay their fees for handling your estate. Their fees are usually directly affected by the size of your estate. It’s their job to prevent you from actions aimed toward avoiding the probate process.

At the other extreme, there are folks selling living trusts and related products and services by any means possible. It is their job to convince you that you must dedicate your life to avoiding probate.

In the middle, you will also find incompetent attorneys, estate planners and other “experts” who blindly accept one extreme or the other. Don’t fall for any radical advice or hard sell. At the end, it’s your call. No attorney, estate planner or any other professional should dictate what must be done with your own property.

Avoiding probate may involve significant time, effort, expenses and dedication on your part. Educate yourself, decide what you really want and act accordingly.

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