What Is Probate?
Probate is the judicial process to distribute probate assets at an individual’s death. Probate assets are distributed under a will or if no will has been executed, under the statutory rules.
At death, assets are classified as either probate or non-probate. Probate assets are the real and personal property that remain in the decedent’s name at death. Non-probate property includes assets that transfer to another through a designated beneficiary, joint ownership, or through a pay on death designation.
The Probate process begins once an application is filed with the District Court. The Court appoints a Personal Representative, who is responsible for collecting assets, notifying creditors, paying expenses, and distributing the assets of the estate. The process generally ends once all debts and taxes are paid, the assets are distributed, and the estate is closed through the courts. If a disagreement were to arise, a probate judge would help resolve the differences.
A will is a written legal document that directs how one’s affairs are settled at death. Among the items that are covered under a will are the establishment of personal representatives, trustees, guardians and in some circumstances to set up trusts and to provide for the distribution of probate assets. A common misperception is that if you have a will, you will avoid the probate court process. The will Governs your probate assets that are subject to the probate process. A will is typically the starting point for an estate plan. In some circumstances, probate avoidance is a good strategy and the will simply serves as a backup to send the property to a trust in case an asset does not have a properly designated beneficiary. In other situations, such as persons with minor children, an estate plan that contemplates a probate proceeding might be beneficial. If minor beneficiaries are likely, trusts and trustees can be set up to provide for the child’s needs. Appointment of Guardian’s can only be done through the court process and thus in the proper situation a probate court process can be a useful tool.
Unless real estate has been placed into a trust, owned in joint tenancy, or is subject to a Transfer on Death Dead, it must be probated. Owning real property in joint tenancy means that the property is owned by two or more individuals who have an undivided interest in the property. In the past owning property often meant that the estate would have to be probated. Relatively recently the Minnesota legislature approved the use of Transfer on Death Deeds “TODD”. Historically the only way to avoid probate for those of us owning real property was to either, set up a trust or, to otherwise divest themselves of ownership of the property. The TODD allows transfer of real estate title upon death. A TODD allows the owner full and unrestricted use of the property during the owner’s lifetime. This deed provides that whatever ownership is remaining at death will be transferred to the owner’s designee. The ownership transfers to the survivor after other owner/(s) die. The Minnesota Courts have jurisdiction over Minnesota real estate that is subject to the probate process. Separate probate processes are generally required in all states where the real property is owned.
If the probate estate is worth less than $50,000, family members may be able to collect the property without going to court through the use of an Affidavit for Collection of Personal Property. Even if the total assets of a decedent exceed $50,000, the Affidavit for Collection of Personal Property will work as long as the probate portion of the property does not exceed this limit. This affidavit process will not be effective until 30 days after death. If personal property exceeds $50,000 or the probate estate includes real estate, the estate must be probated.
In many situations, a successful estate plan will involve planning to avoid probate. This goal can be achieved in one of two ways. If an estate plan sets up trusts and places all of the person’s assets into the trust, those assets will be distributed without court action. A plan that utilizes trusts gives one the ability to spread out the distribution to a child/grandchild over time. This type of strategy also has the benefit of designating a trustee who would have control over assets, without the need for court intervention, should the grantor become disabled. The second method of avoiding probate is to couple a TODD for an individual’s real estate holdings with the careful designation of beneficiaries for all investment holdings. Since this second method would distribute assets to the named beneficiary outright, it is not a good option for grantors with minor children or where the beneficiary might not be able to properly manage his/her assets.
Contact Mr.Herrick today for additional questions and how to set up a special needs trust below.
REQUEST A FREE CONSULTATION
Fill out the form below to receive a free and confidential initial consultation.