The short answer – maybe nothing, maybe something. Whether probate is “bad” is a case-by-case scenario specifically based on what is most important to the individual or family who has no estate plan or who has a will-based estate plan.(or worse, a trust-based plan that was never “funded!”). But Mike, I thought a will bypassed probate. That is a common misconception. A will does not bypass probate . . . a will guarantees a probate. The will must be probated for it to have any effect.
Ok, that was an aside – back to the topic at hand: probate. Like I was “saying,” your most important goals and objectives will determine whether or not probate is a “bad” thing for your situation. Here are the most common complaints I hear and which I am routinely asked to help avoid:
Time consuming: probate can be a very lengthy process. In my experience, the average probate in Michigan lasts a minimum of 6-9 months (except for very small estates). I rarely, if ever, see the process take less time than that. I do routinely see it take longer than that. And the number one thing I’ve seen cause it to drag on longer (sometimes years!) is conflict. Conflict among any one of several people, whether it be a case of multiple personal representatives (e.g., executors), between a personal representative and a beneficiary or beneficiaries, or someone who “didn’t get what they thought they had coming,” and they want to challenge it.
Costly: probate can be costly. In my experience, the average cost is somewhere around 3-5% of the probate estate. That estimate includes everything that could be a cost associated with the probate: probate fee, attorney fees, appraisal costs, bond premiums, CPA fees, filing fees, etc. For example, let’s say you have a probate estate of $500,000 (not hard to get to if you include real estate, retirement, and other assets). 5% of $500,000 is $25,000. That’s a decent “chunk of change,” that many people would rather have going to their family.
Public: probate is public. I’ve had several people request that I “look into” an estate for whatever reason. Simple enough. I go to the county courthouse, go to the probate clerk, give them the name of the person who passed away, and they provide me the file (if a probate has been started). I can look through everything: who the personal representative is, an inventory of the assets, the will (if there is one), what the final distribution (e.g., accounting) was, and more. Anyone can look at the file. So, imagine that you have a young child. You (mom and dad) both pass away and your estate goes through probate. The estate is put into a conservatorship estate for the benefit of your child and it will be paid outright to your child when he/she turns 18. The entire thing is public record. Not only is your child getting the entire amount left of the estate, but there could be less-than-trustworthy people who also know what amount he/she is getting because they’ve been monitoring the probate file. Whose to say they won’t take advantage of that opportunity.
The good news is that you can plan around all of this by meeting with an attorney who focuses on estate planning – specifically one who does so on a relationship model, not a transactional one. Someone who will really learn about who you are, not just what you have, so they can work with you to determine what YOUR most important goals and objectives are and create a plan that meets them.