If you missed the first installment of our probate series – “What is probate?” – you should start here.
How does probate fit into your current estate plan?
I hope through the articles What is Probate? and Do I really want to avoid probate? that you are beginning to make the connection between your own estate plan and probate. It is imperative that you understand how probate fits into your current estate plan (even if that ‘plan’ involves no formal documents and leaves your estate up to the defaults set up under the law (i.e. intestacy)). This installment will outline some typical client scenarios and how probate fits into each.
Q: I am single and have no estate planning documents in place. Is there going to be a probate of my estate at my death?
A: Maybe. Just because you do not have a Will, does not mean you are going to have probate assets at death. For example, if your assets are comprised of a bank account, investment account, retirement account, and stocks, you may have added beneficiary designations on each of these assets. As a reminder, probate property generally is individually owned with no beneficiary designation. Therefore, you can still avoid probate, even if you do not have a Will, by naming direct beneficiaries. If you have a car or real estate, where you cannot name a beneficiary, then yes, those assets would have to pass through probate at your death. Since there is no Will, the law will dictate where those assets go (to your heirs-at-law) and who can administer those assets. It is extremely important to have a Will. This will ensure that if you do have probate assets, the administration is as easy as possible, and your assets are going to the right person(s).
Q: I am married and have no estate planning documents in place. Is there going to be a probate of my estate at my death?
A: Maybe. If all marital assets are jointly owned by the spouses or have beneficiary designations, then usually there is no probate at the first spouse’s death. But, if any of the assets are individually owned, without a beneficiary designation, then there will be a probate at your death, even if your spouse is living. Keep in mind, how Massachusetts law distributes property at your death and to whom is often surprising! For example, if you are married, have no children, but have living parents, then your parents may be partial beneficiaries of your estate (M.G.L. c. 190B, s. 2-102). If this is not your intention, then you must have a Will to override this default under the law and ensure all assets pass to your spouse.
Q: I have a Will. Does this mean there will definitely be a probate at my death?
A: Maybe. Within 30 days of death, the Will must be filed with the probate court. However, that does not necessarily mean a ‘probate’ of the estate will be necessary. Again, this will depend on whether or not you have probate assets at your death. No matter what your Will says, it only has authority over probate assets. So, if all of your assets are jointly owned or have designated beneficiaries, then it may not be necessary to probate your estate. If you have real estate, a car, or assets without a beneficiary, then the probate will be necessary. Since you have a Will, the Will directs who oversees the administration of your probate estate and who will receive your assets (after the payment of debts and expenses).
Q: I created a Revocable Living Trust (inter vivos trust). Does this mean I avoid probate?
A: Okay, by now you are certainly sensing a theme…the answer again is “Maybe.” What is an often ENORMOUS hole in someone’s estate plan is the proper ‘funding’ of one’s trust. The concept of funding is retitling assets during your life into the name of your trust or naming the trust as a beneficiary. You can have the most impressive set of trust documents ever created, but that does not mean your assets have been properly funded or tied into that trust. If your assets remain in your individual name, with no beneficiary designation, then your assets will still have to pass through probate at your death. Typically, a trust plan will include a “Pour Over Will.” A Pour Over Will directs that the assets passing through probate and your estate be paid over to the trustee of your trust, and then distributed in accordance with the terms of your trust. Although the estate administration for this may be easier, it does not mean the estate or probate piece is eliminated. In order to avoid probate entirely, your assets must be retitled into the name of the trust or have proper beneficiary designations. If your trust is fully funded, then yes, you can avoid probate. I find that cars are often the one ‘hiccup’ when it comes to probate assets – as they are generally not recommended to be retitled into the trust and there is no ability to name a beneficiary. So, if the car is the only probate asset, then a probate will be necessary (but in Massachusetts, it is a very simple, quick, and inexpensive probate.)
First article in this series: What is Probate?