One of our first articles outlined the ways that our clients in Massachusetts and on Cape can avoid probate. In fact, avoiding probate is one of the most frequent goals we hear when first meeting with clients. But the information gap we encounter most seems to be that clients don't understand the reasons behind avoiding probate. Further, the goals of an estate plan inevitably change as clients and their families grow older. This article should provide answers for those clients who are just starting - in addition to those who are reviewing - their estate plans.
Goals of Massachusetts Estate Planning - Not Just to Avoid Probate!
Families form estate plans and review every 4-5 years for a reason. If avoiding probate was the only goal in writing a will, then estate plans wouldn't provide much value. And although we're getting a little off-topic, it needs mentioning that creating a durable power of attorney and comprehensive health care proxy in Massachusetts is almost more important for families seeking an estate plan.
But this article is focusing more on the goals of the will. More precisely, we are examining the three most frequent goals in distributing and protecting assets, of which avoiding probate is the first. The other more specialized goals are 1) Lessening Massachusetts and federal estate tax burdens and 2) Reducing risk of Medicaid (MassHealth) liability. Each of these objectives deserves a greater description, many of which are addressed in other articles on this website under Medicaid planning and estate planning.
Avoiding Probate to Lower the Cost of Probate
Depending on the complexity and size of an estate, the probate process may be an expensive proposition for the family. And if there are many beneficiaries involved, meaning that there is a greater chance of disagreement on the asset distribution, then the will could be challenged in formal proceedings. The cost of a formal challenge would be the same as the cost of any litigation, that is to say unpredictably expensive.
But most modest estates that we encounter on Cape Cod do not go through such proceedings, and stay in the "informal" track. And for some, the cost of probate can be reduced even further with a less burdensome process known as "voluntary administration" available to Massachusetts estates less than $25,000 and without real property. These estates are often ones where a basic plan was created, with a home placed in a trust, but assets over the years came into the estate.
Speeding up Distribution of Assets with Probate Avoidance
Another good reason for avoiding probate is to speed up the process of getting property into heirs' hands. Again how long Massachusetts probate process lasts is variable upon the same factors mentioned above, and so the complexity and agreement of an estate and its beneficiaries will ultimately determine the timeline to be followed.
Of particular interest to many operating under the MAUPC (enacted in April of 2012), is the prospect of having to sell real estate through the probate process. While the MAUPC intended to make sales quicker and easier, that has not been the case in practice. So if at all possible, we usually recommend that our estate planning clients form a trust and put any real property within it to save on these potential setbacks.
Keeping Out of Probate Means Keeping Matters and Assets Private and Secure
When assets are distributed via the probate process through either a will or intestacy, that process is a public affair. The personal representative who files for the probate or administration of an estate must publish his or her petition in the newspaper, send notice to beneficiaries, and also to all known creditors. All documents are required to be filed with the court, and any person may view that file accordingly.
In addition to keeping matters private from creditors, avoiding probate in Massachusetts means protecting the assets themselves from creditors. If an individual dies leaving debts outstanding, and also has no assets in his probate estate, then his creditors no longer have the ability to recover from that individual. Any property placed in a trust, for example, will belong only to the beneficiaries of that trust. Similarly, the designated beneficiaries and joint owners of an IRA or bank account respectively will be the sole owners upon the owner's death.
Final Considerations in Avoiding Probate in Massachusetts
Probate matters brought to us, even with some clients who came to us for estate plans, often include an analysis of several non-probate assets forgotten long ago, dating back as far as 60 years. Ordinarily this isn't a problem, but consider for a moment the risk that this highlights: Updating the will or a trust in an estate plan has no effect on non-probate assets. So while we always tell our clients to review their estate plans after a birth, marriage or death, it is still entirely in their hands to change beneficiaries on life insurance, IRA and investment accounts.
Consider, for example, the young couple who take out life insurance policies on one another, subsequently divorce, and later remarry. Without any change in beneficiaries, each former spouse's policy will remain as a benefit to the other - and not to the current spouses. And because there are no "augmented estate" provisions under the Massachusetts UPC, existing spouses have no cause of action on non-probate assets. The possibility of such a situation might seem rare, but a busy family with many assets outside of the probate estate could easily make this same mistake.
This article should have provided you with some initial thoughts on why avoiding probate in Massachusetts might be (or might not be) a good idea. For more detailed questions, Attorney Tim McNamara and Attorney William Yates are always willing to take your call. Please don't hesitate to contact us through the website, email or by phone at 508-888-8100.
View more from Timothy McNamara on the Probate Process, Estate Planning, and Medicaid Planning.
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