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Frequently Asked Questions about Probate
What is Probate and why is it necessary?
Probate is the legal process required when you pass away with assets in your name only.
The probate process allows us to legally distribute your assets to your heirs or beneficiaries, but only after satisfying your legal obligations (outstanding debts and taxes of the estate).
What assets are subject to probate?
Probate assets are the assets owned by you in your name alone at the time of death. The exception to this rule: if the solely owned asset has a designated beneficiary (other than the estate).
You may be able to avoid the probate process entirely by naming a beneficiary on life insurance, annuities, individual retirement accounts, 401(k)s, or other retirement accounts. The company then simply pays the policy proceeds to your named beneficiary. These assets will not require any type of probate.
While not typically recommended, probate can also be avoided by joint ownership of accounts. There are many pitfalls to joint ownership when the co-owner is not your spouse. You are exposing your assets to the co-owner’s actions and control. That person could empty your bank accounts or jeopardize your accounts through divorce, creditors, or bankruptcy. Meanwhile, the only benefit is probate avoidance.
Many people assume a surviving spouse automatically inherits the deceased spouse’s property. This is not true. A surviving spouse typically receives everything because of joint ownership or beneficiary designations. The surviving spouse simply claims the beneficiary designated assets or continues to own the joint property. Will your spouse have to go through the probate process when you pass away? You should take a minute to review your account ownership and beneficiary designations.
You may also utilize a revocable trust agreement for probate avoidance. Simply signing a trust agreement does not avoid probate. You must fund your trust – meaning the trust becomes the new owner or the designated beneficiary of your assets. You would no longer own property in your name alone. The trustee holds legal title to property, which avoids probate.
Does my will avoid probate?
No, a will does not avoid the probate process. Your will allows you to nominate who you want in charge of your estate and how you want your assets distributed. Again, whether probate is necessary is determined by the nature of your assets at the time of your death.
What if I die without a will?
Intestate means you passed away without a will. Michigan law dictates who has the right to be your personal representative (previously called executor or administrator).
Intestacy laws also mandate the distribution schedule to your heirs. Depending on the value of your estate, your surviving spouse might not receive 100% of your estate. Your spouse may have to share the estate with your children or your parents.
Where does probate occur?
Probate occurs in the probate court for the county you resided in at the time of your death. If you own real estate in another state, a second probate proceeding in that state will likely be required.
How long does the probate process take?
The duration of a probate administration depends on several variables -- the type of probate matter, the size of the probate estate, and the type of probate assets. A probate estate may take approximately 7-9 months. The earliest the estate can close is 5 months after commencement. If you own assets that would be difficult to liquidate, the duration will increase accordingly. A small estate (estates under $23,000 in 2018) can be probated much quicker than a larger estate.
How much does a probate administration cost?
The cost of a probate administration depends on several variables like attorney, accountant, and personal representative fees. However, there are some known costs payable to the probate court. The initial filing fee is $175. The court will also assess an inventory fee based upon the value of the probate estate. For example, estates valued at $150,000 would owe $425 in an inventory fee whereas estates valued at $500,000 would owe $863.
Will my family have to pay an inheritance tax?
Yes, but only if your gross estate exceeds the federal estate tax exemption for the year of death:
Year of Death Exemption Amount
2006-2008 $2,000,000
2009 $3,500,000
2010 $5,000,000 or $0
2011 $5,000,000
2012 $5,120,000
2013 $5,250,000
2014 $5,340,000
2015 $5,430,000
2016 $5,450,000
2017 $5,490,000
2018 $11,180,000
The federal estate tax is only assessed on the amount exceeding the exemption amount.
Each spouse has their own exemption amount, but the surviving spouse also has a portability tax election available to him or her. Portability allows your spouse to capture any of your unused exemption amount, adding to the spouse’s exemption threshold. This must be done through a tax election.
If your estate is under the exemption threshold, your family is not taxed on the sum they inherit. They may be responsible for taxes on the income earned by your probate assets.
Should I avoid probate?
Setting up your estate plan to avoid probate may protect your privacy, reduce court expenses, reduce time delays, maximize control, and avoid Medicaid estate recovery.
Your assets, circumstances, and family dynamics factor in when determining whether your estate should avoid probate. Each case is different and there is no right or wrong answer. You need to make an informed decision based on your circumstances and goals.
Contact the office to schedule your free (up to one hour) initial consultation to discuss how probate affects you and how to optimize your estate plan to meet your objectives.