For many, the number one goal for estate planning is to avoid probate. You may be asking yourself what is probate? Without getting too technical, probate is the legal process of wrapping up your affairs upon your death, including, paying your creditors and distributing your assets according to your Will or state law if you don’t have a Will. The local probate courts oversees this process.

Three mistakes that typically land our affairs in probate court are (1) no planning, (2) incomplete planning, and (3) debt left behind. It is normally the latter two that seems to catch families off guard. Certainly, if you don’t plan and you have assets (i.e., house, car, and/or financial accounts) left solely in your name without any named beneficiaries or joint owners, welcome to probate court! 

An example of an incomplete plan is when you have a well drafted Trust but one that was not funded. With this scenario, you will likely end up in probate court. Puzzled? Well, it happens. The story goes as follows…the law firm that prepared your Trust offered to fund your Trust as an add-on but you declined in hopes of saving money by doing it yourself. But then, you never got to it. You forgot to fund your Trust – meaning, you did not give your Trust legal authority over your assets by changing ownership of your assets, including filing a new deed for any real property or naming your Trust as a beneficiary. This sets the stage for a red carpet reception at your nearest probate court.

Finally, even if you decided to put your affairs in order by naming beneficiaries for all financial accounts and utilizing transfer on death options for real estate and other assets, your affairs may still wind up in probate court because of two words: SECURED DEBT. If you leave behind a mortgage, line of credit, or car loan, your loved ones may inherit the assets outside of probate court but they will need legal authority to speak to your creditors and deal with the debt attached to their inheritance which will ultimately land them in…you guessed it…probate court.   

So what does this all mean? If your goal is to avoid probate, you need to have a comprehensive plan that considers your debt. This may not be an area where you want to save money by downloading the latest DIY app. And, don’t forget your own responsibility that if you incurred the debt, you should have a plan to satisfy it during your lifetime. Your loved ones will thank you for it.