A great deal of misleading information is currently circulating on the internet and in the media, which paints the probate process in a bad light. There are businesses who use this misplaced fear of probate to market expensive living trusts packages to ‘avoid probate’. Many individuals fear probate without understanding what it really is.
Probate is the legal process that takes place after the death of an individual. A deceased person’s estate is ‘testate’ if that person had a valid last will and testament. If a person died without a will, their estate is ‘intestate’. The purpose of probate is to identify a decedent’s assets and creditors to ensure the assets of an individual are transferred after death to their heirs and/or the devisees named in their will.
Probate can and often is a very useful process for the beneficiaries of an estate. The probate process ensures a decedent’s assets are fully disclosed to the beneficiaries of that estate. The executor of an estate (known as a Personal Representative in Maine) is required to follow the terms of the decedent’s last will and testament in making distribution of their assets. Opening an estate for probate shortens the time creditors can file a claim for payment.
The creation of living trusts was once the staple of a lawyer’s estate planning practice; however, these expensive legal entities are no longer the standard or best option for most people since the tax code was fundamentally changed in 2018.
In 2022 the federal estate tax exemption increased and is now $12.06 million dollars per person. The Tax Policy Center estimated that in 2018 only 1,700 estates in the entirety of the United States would owe estate tax. While the State of Maine exempts estates under $5,800,000 from its state tax, there are very few estates in Maine that rise above that threshold.
The creation of a living trust does not protect your assets from the expenses of long-term nursing home care, nor does it protect your assets from federal or state taxation, as the assets of living trusts are still considered when determining the application of the estate tax. Unlike probate, a living trust has no set claim period when creditors can make claim against its assets – a claim can be filed at any time.
Having a living trust requires you to always be mindful to transfer all assets and any new account into the name of the trust, managed by the Trustee. A Will can be changed at any time and automatically will pick up all probate assets that exist at the time of your death. Probate can therefore be less expensive and more efficient, as no specific action is needed every time you acquire a new asset or open a new account.
Don’t be fooled – there are many reasons why going through probate may be beneficial to you and your family. Weigh your options and make an informed decision about whether probate is right for you.
Johnson Legal, LLC
Legal consulting and advocacy in Brunswick, Maine.
207-725-9292
johnsonlegalme.com
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