Rumor Has It…The Truth About Probate, Wills & Trusts – Part I

I saw a post on Facebook last week giving legal advice about how to avoid probate. This was one of those posts that was acting like a PSA to encourage people to get their affairs in order. I wholeheartedly agree that every adult should take steps to get their affairs in order. However, I do not think taking advice from a post or comment on Facebook (or TikTok) that was obviously created by a non-lawyer is the way to go. 

While the information in the post was not technically wrong, it was not state specific and encouraged people to do things that require a good understanding of state legal requirements for wills, trusts, deed preparation, and probate. In this series, we’re going to walk through some of the myths I’ve seen on social media recently, and give you the facts about probate, wills & trusts.

Before we dive into the myths, let’s first talk about what probate is, exactly. 

Probate is a court process. When a person dies (the decedent), someone files a petition with the Court to begin this process of settling the person’s affairs. In Maryland, the process takes an average of 12-18 months to complete, even for a “simple” estate.

Myth #1: All of the decedent’s assets go through the probate process.

Truth: The only assets that must go through probate are those assets (bank accounts, real estate, stocks, etc.) that are titled in the name of the decedent alone. This means that if you own a house or a bank account jointly with your spouse or someone else, in most cases, it will not go through the probate process because it automatically passes to the other joint owner at your death. There are some exceptions to this rule, and I will address those in Myth #2. 

The other types of assets that are not included in your probate estate are those with a beneficiary designation. Retirement accounts and life insurance policies are the most common examples. If you name a person as the beneficiary, that person will get the money outside of the probate process. This is the same for bank accounts that name a “Pay on Death” or “Transfer on Death” beneficiary. Maryland MVA also allows you to designate a Transfer on Death beneficiary for your car. Maryland does not allow “Transfer on Death” deeds for real estate, although some states do.

The exception to this rule is if the person you named as the beneficiary dies before you and you don’t update the beneficiary designation, leaving no named beneficiary. In that case, the proceeds will be paid to your probate estate. Again, this is a general rule, and your specific policy or account may have a different requirement. It’s best to have an attorney or other professional look at the policy or account to see what happens if no beneficiary is named.

Myth #2: If you own an asset jointly with someone else, you will avoid probate.

Truth: Maybe. In most states, there are several ways you can own real estate jointly. In Maryland, married couples can, and in most cases should, own property as “Tenants by the Entirety.” This means that if one spouse dies, the other automatically becomes the owner of the property. It also allows creditor protection if one spouse is sued. 

Another form of joint ownership is “joint tenants with right of survivorship.” Similar to tenants by the entirety, when one owner dies, the other will automatically own the entire property. This does not, however, offer creditor protection. If one owner is sued, the house could be at risk.

A third option is tenants in common. With this type of ownership, each owner has a separate interest in the property (rather than a joint interest). If not specified in the deed, the ownership interests are generally considered equal. The difference here is that when one owner dies, his or her interest is considered separate property, and will be subject to the probate process. This type of ownership is common when two or more people want to buy an investment property and keep their ownership interests separate. This could, however, cause problems if one owner dies and their share ends up passing to their children through probate. Now there could be multiple owners who disagree on what should happen with the property, and conflict can arise.

A less common option is called a life estate. This is where one person has the right to own/use the house during their lifetime, and then upon their death, it passes to the “remaindermen” who are listed on the deed. I am generally not a fan of this type of ownership option for reasons that are off topic for this article, but it does exist and it does have its place.

Deciding which type of ownership you should have for your property can get tricky, and could result in unintended tax consequences for your beneficiaries, so it’s always best to talk to an attorney before changing the title to your deed. 

Myth #3: If you have a will, your estate won’t go through probate.

Truth. Wrong. I have seen so many comments on social media stating that “if you have a will, you won’t go through probate.” This is just wrong. By their very nature, wills must go through probate. Not only does the probate process oversee the administration of your estate, it also validates your will. Only a judge can do that. Wills are still a very necessary part of your estate plan because you get to choose who handles the estate and how your assets should be distributed. If you have minor children, you also get to choose who you want to care for your kids if both parents die. In fact, the only way to make that choice is with a will. If you don’t have a will, your state’s laws and a judge will make these choices for you. 

Myth #4: Probate is bad and should be avoided.

Truth. Not necessarily. Remember, probate is a court process, and like all court processes, there are specific rules that must be followed. Most people aren’t familiar with court and how things work, so getting the process started can be confusing. Keep in mind that probate also occurs shortly after a loved one has died, so family members are still grieving. The added stress of locating assets and dealing with the Court can become overwhelming. There is also a significant time commitment to going through the probate process, and the family members may have to put their own lives on hold to get things done on the court’s timeline. Of course there are a lot of lawyers who can assist with the process, and that can get expensive depending on how organized the decedent was and how cooperative family members are being. 

I have talked to a lot of people who have handled probate cases for loved ones on their own. They got through it just fine, without a lawyer’s help. But every single one of those people has told me that it was a complete pain and they just wanted it to be over. Based on all this, it’s hard to say that probate should be avoided. It is, however, easy to say that probate can be avoided with proper planning.

Next week, we’ll talk about ways to avoid probate, and dispel the social media myths about how easy it is to do it yourself.

If you have any questions, or would like us to review your estate plan, schedule a free 15 minute call with us here