Probate Nightmare: Why Your Family Will Hate You When You Die

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The Financial Nightmare Coming for You When You Die: Probate Explained

Today we're going to talk about a financial nightmare that is existing for every single one of you. Do you know what that nightmare is? It's coming for you when you die. It's called probate.

It is a legal process that can tie up your family's inheritance for, on average, six to 18 months, costs thousands of dollars, and basically makes all of your financial business public record. Isn't that nice?

Your Two Options

All y'all have two options when it comes to probate. It's either a will or it's a living trust. So I'm starting a two-part series today and this particular one is why probate exists and what actually happens. Next week, I'm going to talk to you about living trusts and tell you my honest opinion.

So let's dive in.

The Legal Problem Probate "Solves"

Here's the legal problem that probate supposedly solves. When you die, you can't sign legal documents anymore because you're dead. And the assets that are in your name alone have no legal owner anymore.

So the court needs to find a way to verify that your will is valid and that you actually signed it. Someone needs the legal authority to pay your debts and distribute your assets. If you've been that person for anybody in your life, you know what a pain in the butt that can be.

So what I want you to do is think of probate as basically the court asking, "Hey, people, who has the right to clean up this person's affairs?" That is probate.

The Five Steps of Probate Hell

So while probate is happening, here's basically what's happening. It's five steps.

Step number one is they go through the process to validate your will. And if there is no will in place, then it follows to whatever the state law is.

Step two, it appoints somebody with legal authority to actually do things on your behalf because you're dead. That person becomes the executor or the administrator.

Step three, they inventory and they value all of the assets that you own, whether you own 10 homes or no homes. They will put an inventory and value on those assets.

And then step four is the court actually pays your debts and your taxes if there are any debts or taxes to pay.

And number five, it distributes the remaining assets to the beneficiaries. In other words, the people that you love that you want to get your stuff.

Why It Takes Forever

Let's talk about why it takes so long to get through probate. It can take anywhere from six to 18 months to get through probate. I can tell you, in my career, I have helped lots and lots of people be the executor or the administrator of a probate, and it is such a long process. If you need my help with that, you let me know.

So the reason it takes so long is that creditors—so anybody, like, I've seen it be where somebody had a car loan or a boat loan or something like that—the creditor that financed whatever the asset was gets up to four to six months to file a claim against the estate.

Then there's court scheduling. If you've ever dealt with the state, you understand right away that nothing goes fast when it comes to the state. Think DMV. Well, court scheduling is even worse than that. Judges have busy calendars and you're dead, so it's like, why do they even need to hurry?

Asset Discovery: The Treasure Hunt From Hell

Then there's another step in there where there's asset discovery. So it's actually finding all the accounts that are out there, insurance policies, and investments. If you have ever been an administrator or you're going to be the administrator of somebody's will, this is a big old honking deal, because finding all the accounts and the old jobs that your parent worked or whatever, to get their 401k statement so that it can go through probate is such a pain in the butt. Oh, my word.

And then on top of that, we have tax issues and potential audits. So yeah, probate sucks.

You Have No Control

And on top of all that sucky stuff, you have no control. The executor of your will can't sell the assets without getting approval from the judge. The family can't access any of the money for funeral expenses because it's in probate.

Business decisions are going to require court hearings, like if you own many rental properties, for instance, that can get you into a lot of trouble.

Everything Becomes Public Record

And also, everything becomes public record. Yes, you heard me right. Everything that you own and owe becomes public record, from your will to your asset values, and any family disputes that arise.

Oh, my gosh, probate is the worst.

The Living Trust Solution (Sort Of)

So hopefully you are wondering, how do I avoid probate or how do I make sure my kids don't have to do probate? Well, this is why people are so drawn to living trusts.

But I'm a truth teller, right? I'm going to tell you the truth about that. Living trusts can also suck, which we're going to dive into next week.

The Bottom Line

But now you understand probate and the problem that trusts are supposed to solve. It's a nightmare system that ties up your family's inheritance, costs thousands of dollars, takes months to complete, and makes all your private financial business available for anyone to read.

Your family deserves better than having to navigate this mess while they're grieving. Next week, we'll talk about living trusts and whether they're actually the solution everyone claims they are.