Probate in Pennsylvania: 3 Reasons to Avoid It
When you pass away, it may be necessary for your family to visit a probate court to claim the inheritance you left behind. If you own a house, car, bank account, investment account or any other possessions you wish to pass on after your death, your family could be in store for a long probate court process. It doesn’t have to be that way.
What is probate?
While probate isn’t always complex or contentious, it is important to understand the process, particularly if you want your family to have access to your assets with minimal delay and expense after you pass away.
In simple terms, probate is the legal process for distributing your property upon your death. When you own an asset, it is generally titled in your name to indicate your legal right of ownership and control. For example, if you own a home, you have a deed that lists you as the owner. If you sell the home while you’re alive, you will sign a deed transferring title from yourself as the seller to the buyer. But if you were deceased, who would have permission to conduct this transfer on your behalf?
In Pennsylvania, we call this person your Personal Representative and they are generally named in your Last Will and Testament. Your Personal Representative, often called an “Executor”, will need to submit forms to the Orphans’ Court in a process known as Probate to get permission for the transfer of the deed. This is the only way ownership and control over your assets can be transferred to your family. Without the probate process, nobody can access or control your assets.
Why should you avoid probate?
Here are some common complaints about probate.
1. Probate can be slow
The process typically does not get started until a month or more after your date of death. That’s a month during which your family has no legal access to your assets for their own support or to pay your debts. A month during which bad actors can get into your house and clean it out without anyone having the authority to stop them. Once started, in most cases probate takes at least a year to complete. It involves a series of court-supervised steps, including submitting the will to the court, inventorying and appraising assets, notifying creditors and beneficiaries, filing tax returns and paying taxes, settling outstanding debts, and more. Probate can take months or even years to complete, and until the estate is fully administered, family members may not be able to receive possession of assets and property left behind. For example, if you pass away, your loved ones may not be able to move into your house, renovate it, or sell it until probate is done.
2. Probate can be expensive
Costs vary from state to state, but probate generally entails executor and attorney fees, court fees and other administrative expenses, such as appraiser’s fees. Conservatively, fees and costs will be between 5-10% of the value of your assets. For an estate valued at $500,000 (which isn’t difficult if you own a home), fees and costs will likely exceed $25,000. Does that sound like a lot of money? It is. In some cases, these charges can accumulate quickly. If there is a dispute over the will, or conflict among family members or with creditors, litigation may need to occur, which is expensive and can deplete the estate. You’ve worked hard to leave an inheritance for your family, and you want to make sure they are taken care of when you’re gone. When you avoid probate, you can keep your hard-earned assets from being depleted by these unnecessary costs
3. Probate is not private
Since probate is a legal proceeding, what goes on in probate court does not stay there. All the material in the probate process goes into the public record. Things in your Will that you’d prefer not be public, such as a broken relationship, secret relationship or family member with substance abuse history, will be made public. The assets that you own, the value of your assets and any messy arguments among your family will be there for everyone to see.
How can you avoid probate?
Here are 3 ways you can take to avoid probate.
1. Name beneficiaries on all of your accounts
Many of your financial accounts allow you to designate a beneficiary who will be payable upon death. This means all the proceeds from your accounts will be given to them rather than going through probate after you pass.
Certain accounts are referred to as a “payable on death” accounts while non-retirement investments are known as “transfer on death” accounts and include:
Bank accounts
Brokerage accounts
Life insurance policies
401k plans
IRA accounts
We like to call this “DIY” estate planning. The do-it-yourself ethos is one we heartily applaud. Most services provided by attorneys are not cheap, so the notion of taking care of certain things on your own to save a few bucks is appealing. But sometimes the DIY route can wind up costing you a lot more in the end.
2. Co-ownership of property
Holding property jointly allows the property to transfer directly to the surviving owner. During your lifetime, you can retitle a property deed to share ownership as joint tenants with a loved one to whom you'd like to pass the ownership to after your death. You can put someone’s name on an account and if they survive you, the money in the account will pass to them without probate. But co-ownership comes with a complex set of issues and pitfalls. Before you add someone to an account or deed, weigh these considerations.
3. Set up a living revocable trust
A great way to avoid probate is to create a trust. A trust outlines what will be done in terms of asset distribution without the courts being involved. While a will distributes your assets and property after your death, a trust allows you to place your assets and property “in trust” while you’re alive so they will not require distribution after your death.
You will personally appoint yourself as trustee to manage your trust while you’re alive. If you become disabled, your successor trustee can manage the assets in the trust while you’re alive for your benefit. This avoids complications over powers of attorney or expensive guardianship proceedings. After you pass away, your successor trustee follow your instructions in the trust to manage and distribute your assets to your family. Besides avoiding probate, a trust makes a smart estate planning tool because:
A trust is private. Probate records are public court records, which means that anyone can look up how your assets and properties were distributed in a will following your death. None of this information will be publicly available when you create a trust because your beneficiaries will not need to go through the court system.
Trusts can be less expensive. Your estate will need to pay for the court fees associated with probate, which can cost anywhere from 5% to 10% of your total estate. You do have to hire a lawyer to set up a trust, but the costs of setting one up are far less than 5-10% of your estate that will not go to your family if you go through probate.
Trust assets pass to your family faster. Probate is a process that may require a year or more. Your beneficiaries may need to wait a substantial time to receive what you leave them, which could put them in financial strain. With a trust, as soon as you pass away, your trustee has access and control of your assets in the trust. Your trustee doesn’t need to be appointed by the court to carry out your instructions. Since a trust avoids probate, distributions take only a few weeks instead of several months or years.
Let’s talk about what’s right for your family
Many people don’t want to think about their death, and understandably so – it can be frustrating, and sad, and even scary to think about your family having to make do without you to provide for them. However, no one is guaranteed tomorrow. If you pass away without planning ahead, you could leave your family in a difficult financial situation, and that’s not the kind of legacy you want to leave behind. Avoiding probate is a time-sensitive matter! The experienced estate planning attorneys Fiffik Law Group can help you get your affairs in order with the least amount of stress and maximum amount of protection possible. Call today to request a free consultation and learn more about how we can serve you!