Before answering this question, let's first dive into what probate is and which assets are subject to probate.
Probate is the act of proving the Will to the Court (specifically the Register of Wills) in the county where the deceased person resided in order to have the named executor(s) appointed, or if there is no Will, to have the person(s) entitled appointed. After the individual is appointed, the Court issues "short certificates" which allow the appointed individual to then administer the estate. The Court then oversees the administration of the estate to ensure that all filing requirements are adhered to and that the interests of those entitled to money from the Estate are protected.
Assets that are held in the Decedent's individual name are typically subject to probate, while assets titled in joint names or assets that list beneficiaries are considered non-probate assets. In other words, only the assets in the Decedent's individual name need to be reported to the Register of Wills. This is because the Executor/appointed representative cannot access individually-held assets without permission from the Court. For example, a house in the Decedent's name only cannot be transferred or sold without someone being appointed first. Joint accounts owners and beneficiaries do not need short certificates to access and receive the funds left to them.
Now that you understand probate and the assets subject to probate, let's cover the top reasons why clients think they should avoid probate:
1. To avoid probate fees.
Unlike some other states, probate in Pennsylvania is not typically a cumbersome or costly process. Each county in Pennsylvania has established its own fee schedule for probate costs. Our Montgomery and Bucks County fee schedules can be found using the links below. The actual cost is based on the value of the assets held in your individual name (or your portion of any property held as tenants in common) at the time that you pass away, plus some additional court fees. At the time that you probate, you may not know the exact value of the Estate so the fee is based on what you think it may be at that time. When you file the required Inventory (typically at the same time the inheritance tax return is filed), the Register of Wills will determine if there is an additional fee owed. For example, if you think the Estate contains $200,000 in assets when you probate, but the Estate turns out to be valued at $350,000, there will be an additional fee owed.
Montgomery County Register of Wills Fee Schedule: https://www.montcopa.org/DocumentCenter/View/19235/ROW-Fee-Schedule---Effective-December-1-2017?bidId=
Bucks County Register of Wills Fee Schedule:
2. To avoid inheritance taxes.
Aside from life insurance, all of your assets passing at the time of your death will be subject to Pennsylvania inheritance tax. Period. This includes assets held in your individual name, held in trust, held in joint names, and assets paid directly to beneficiaries. While there are ways to minimize the tax through careful planning during your lifetime, all remaining assets (except life insurance) passing at death will be subject to this tax.
3. Their financial advisor, friend, family member, etc. says to avoid probate.
This is probably the most common reason why clients tell me they want to avoid probate. However, when I ask clients to tell me specifically what they are trying to accomplish by avoiding probate, they struggle to answer. Creating an estate plan to specifically avoid probate should be discussed and executed carefully with your estate planning attorney as estate planning is not one-size-fits-all. If it makes sense to make changes to your estate plan, to convert certain assets into joint names or to list beneficiaries so that those specific assets avoid probate, your estate attorney can provide valuable insight for ways to appropriately accomplish this and review any tax consequences with you.
To conclude, creating a plan that specifically avoids probate requires careful planning and consideration. For most Pennsylvania residents, there's little benefit to avoiding probate entirely. To discuss your specific estate plan or make changes to your estate plan, please call 267-625-8877 or schedule an appointment on our "Practice Areas and Online Booking" page.