Avoiding probate is a good idea for a number of reasons, including helping to save your estate money. However, there are a lot of things that probate cannot do. As part of estate planning, it is important that you understand what probate cannot do so that you and your attorney can explore other means for handling issues.
Probate Does Not Avoid Taxes
Probate can help save money on court filing and attorney's fees. However, it cannot help your estate avoid taxes. Even if you give away money before death or leave it to your heirs, the state and federal government still want taxes paid on the money.
There is good news though. Unless you are leaving a considerable sized estate, the amount of federal taxes that must be paid can be small.
Your Creditors Can Still Collect
Some people mistakenly believe that by avoiding probate, they can prevent creditors from going after the estate for debts that are owed. In reality, skipping probate does not eliminate your debt to your creditors. As a result, your estate might still be required to pay debts that are owed.
In this instance, going through probate might work to your estate's advantage. When the executor of your state files a formal petition in court to start the probate process, he or she is required to place a notice of the filing in the local newspapers. The notice basically demands that all creditors submit claims for their debts.
The creditors have a certain amount of time to file the claim. If they fail to do so within the time outlined by the court, then the estate most likely will not be forced to pay the debt. By contrast, if your estate takes steps to avoid probate, the creditor has the right to sue for the debt. The amount of time allowed for the creditor to sue could be longer than the amount allowed by probate.
As a result, your estate would end up paying the debt. In this instance, gambling that the creditor will not file a claim on the estate during the probate process could be more favorable.
There are many other reasons that probate avoidance might not work for your particular situation. To further explore them and get a fair assessment of your estate, consult with an probate attorney like Leon J Teichner & Associates, P.C. He or she can help you determine whether or not probate avoidance is a good idea and alternative decisions you can make to protect your estate.