We’ve had a few articles in our newsletters this year covering the potential disadvantages of having an estate end up in probate court. First, let me remind you what probate is with a quick definition.
“Probate is the process of validating a will. At its core, it is a legal procedure that takes a deceased person’s assets and retitles them to someone else. If the deceased person did not have a will, then their property is distributed via their state’s intestate or inheritance laws. If the person who passed away executed a legally valid will that clearly expresses their desired distribution of their estate, then probate is supposed to provide a court-supervised, orderly change of title according to their wishes. (Rethinking65, “Probate is a Four-Letter Word”, Seth Bier)
Some of the disadvantages of probate that we haven’t discussed in detail are related to cost: financial, time, and privacy. Did you know that the costs of probate vary from state to state, and range from 3% to 7% or more of the fair market value of the estate (Investopedia, Avoiding Unnecessary Probate Costs). You can find information about probate costs for all 50 states here.
In Michigan, for instance, attorney fees can range anywhere from four to eight percent of the estate value. So, for an estate of $500,000, attorney fees alone could range from $20,000 to $40,000. Though those fees can be pulled from the estate, the attorney fees associated with hiring an estate planning attorney in advance of death would likely be quite a bit less on an estate of that size.
As it relates to time, in Michigan, it is reported that very simple cases can take at least 7 months and sometimes a year or longer. Therefore, more complex cases would likely be tied up in court for more than a year. The real costs here are the inaccessibility of the estate’s proceeds for bill payment, funeral costs, etc. and the engagement of heirs in drawn out proceedings. This can leave beneficiaries in the uncomfortable position of having to pay expenses out of their own pocket, money they may or may not have available.
From a privacy perspective, you may have noticed that everything that happens in probate court is open to the public. That means anyone can attend probate court hearings, and probate files are open to the public. In addition, wills become public record once they are admitted to probate.
If you don’t have an estate plan have a conversation with your advisor about whether it might be helpful in your situation. There is no one right or wrong answer, but it is important to understand some of the potential pitfalls of probate – the avenue your heirs would likely have to take in the absence of required documents.
Back to the Newsletter:
Disclosure
*Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Stephens Consulting, LLC, doing business as Stephens Wealth Management Group (SWMG), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Stephens Consulting.
Please remember that if you are a SWMG client, it remains your responsibility to advise us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to their individual situation, they are encouraged to consult with the professional advisor of his/her choosing.
SWMG is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of SWMG’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Links are being provided for information purposes only. SWMG is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors. SWMG is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Important Disclosure.
Please Note: Stephens Wealth Management Group does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to SWMG’s website or newsletter or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.