Have you ever wondered how your estate’s assets would be distributed once you are gone? Perhaps you have drawn up a Last Will or Living Trust. But, what if you die without leaving a will or an estate plan? That’s where probate comes in.
It’s the legal way that the estate of the decedent gets settled under the supervision of New York probate court. The whole probate process begins with the appointment of an estate representative or executor -- a person nominated by the deceased’s Last Will (usually a surviving spouse/child) or someone appointed by the court if there’s no Will. Once named, the executor will have legal rights to collect and appraise all the assets owned by the deceased estate, pay off accrued debt, bills, taxes, and, eventually, distribute the remaining assets to the beneficiaries or heirs.
Of course, the entire probate process is far more complicated than that. For starters, it can take up to nine months of back and forth in the court, and cost oodles of money in the process. So, why is probate necessary?
The primary goal of probate is to keep fraud at bay once someone dies and allow ample time to probate the will. It freezes the estate so that the judge can ascertain the validity of the Will, as well as make sure that all relevant parties are notified, that all assets have been identified and valued, and that all applicable taxes, bills, creditors, etc. have been duly paid. Not all estates, however, have to go through probate.
When is Probate in New York Not Needed?
When the Estate is a “Small Estate”
If the total value of an estate is under $30,000, it’s taken as per NY law to be a “small estate,” and doesn’t have to go through probate.
When All the Assets are Not Subject to Probate
Certain types of assets are not subject to probate in New York and can be transferred automatically to beneficiaries upon someone’s death. Such assets include joint tenancy assets, tenancy by the entirety, beneficiary designations (life insurance policies, etc.), TOD, POD, and brokerage accounts.
When there’s a Living Trust
If the decedent had drawn up a Living Trust to hold his or her assets, the surviving beneficiaries and heirs would not have to go through the harrowing probate process.
Important Steps in Probate Process
There are three critical steps in the probate process.
Phase I: Petitioning for Probate
This phase starts with filing a petition to the probate court. The objective of this step is to convince the court to issue a decree validating the Will as well as appoint an executor of the estate (if there’s no Will).
At this stage, the executor will gather, determined, and make an inventory of all the deceased’s assets -- and then submit it to the court for review within six months of his or her appointment. It’s the responsibility of the executor to settle any debt and pay all bills and taxes associated with the estate. Once done, the executor will then file a petition with the court to close the probate.
Phase III: Distribution, and Closing the Estate
Once the court satisfied, it then orders the executor or estate representative to distribute the remainder of deceased’s assets to the right heirs and beneficiaries. The executor is legally entitled to a statutory fee which he or she can take or forfeit.
Understanding Estate Planning Costs
Estate planning is the perhaps the smartest move you can ever make to safeguard your loved ones after you pass on, and ensure your care in case of incapacity. The truth of the matter is that estate planning is not a cheap affair. In fact, a recent survey confirmed that more than 66 percent of Americans consider estate planning to be out of their reach.
If you have been putting off the idea of planning your estate, the chances are that you are concerned with the associated costs. So, how much does estate planning actually cost? Right off the bat, I must confess that the cost of an estate plan can vary significantly depending on a number of factors, including whom you choose to be your attorney.
The trick to keeping estate planning costs low is to start small and bring in additional features later. If you want a basic estate plan, for instance, start off with a combo of Healthcare Durable Power of Attorney (popularly referred to as healthcare PA) and Durable Power of Attorney. As you might expect, this package will not give your family 100% peace of mind.
Take It Up a Notch
Once you’re ready to take the next step, it’s high time to add beneficiary designations, Paid on Death and Transfer on Death Accounts, as well as beneficiary deeds. The good thing about these additional estate planning documents is that they’ll help your loved ones inherit your estate without the need to go through probate process (which is a huge headache).
To make sure that estate transfer is as smooth and hassle-free as possible, it’s also wise to add a well-structured Last Will and Testament. These two documents will go a long way to protect your loved ones and make sure your assets to go the right person at the right time without the interference from courts and judges.
Revocable Living Trust
For most people, including a Revocable Living Trust is the last step in estate planning. And for good reason. RLT is not only one of the most complex documents in estate planning, but it can also become quite expensive to draw up.
All in all, drawing up an estate plan is a significant financial undertaking. All of the documents above are complex in their own right, and even a slight mistake can jeopardize the whole Trust. If you want to get a good picture of how much estate plan will cost you, however, it is important to seek counsel from a reputable estate planning attorney.
4 Secrets to Saving On Estate Planning Costs
Tip #1. Talk About the Fees Up Front
Most estate planning attorneys offer a free, no-obligation consultation. Even before you go to this meeting, call or email your potential attorneys to inquire about what and how much fees they charge. Most attorneys charge a flat-rate fee or by the hour. If he or she charges by the hour, for instance, inquire further about the rate and get an idea of how long the process will take.
Tip #2: Get to Know What You Need
Before you meet with an attorney, it pays to get a feel for what you need in your estate plan. It might be helpful to consult with your financial advisor or read up on estate planning material. Either way, be sure to know a little about the durable power of attorney, healthcare durable PA, last will, testament, and perhaps trusts.
Tip #3: Be Decisive and come Prepared
Inquire about what you need to bring to the attorney. Do you have to pay for an initial consultation? Will you pay the attorney fees up front? Get answers, but most importantly, meet your attorney when you are fully decided.
Tip #4: Hire the Right Attorney
Not all estate planning attorneys are created equal. Get recommendations from friends, family or colleagues you trust. And don’t just take their word for it -- it’s best to read reviews, contact references, etc. before making the hiring decision.