Common Misconceptions Regarding Estate Planning
Two of the most widespread misconceptions regarding estate planning are that having a last will and testament enables your heirs to avoid probate, and that in a community property state, upon the death of a spouse, estate assets automatically transfer to the surviving spouse. Both of these notions are inaccurate, and lead to confusion for people after a loved one passes away.
What Takes Place After I Pass Away?
Regardless of your religion, we all ponder what happens when we die! We can only address this from a legal perspective, but having some kind of estate plan will certainly assist your loved ones during an already difficult time. One of the most common documents we associate with estate planning is a last will and testament. However, this is not the most helpful document, because a will is not valid until a judge approves it. Many believe having a will helps your heirs avoid probate, but a will, by definition, guarantees that the heirs will go through probate court if there are any assets. A will does not take effect until 1) you pass away and 2) A judge confirms the validity of your will.
What Is a Last Will and Testament?
In short, a last will is a set of instructions for the probate court, stating how to manage your assets, pay your debts, and distribute your assets when you are gone. Probate is a legal process where a judge enforces the will's instructions to transfer assets after death. Probate hearings become public record, so all your assets and financial information becomes accessible to the public.
Steps to Confirming a Will
After someone passes away, there is a five-day waiting period. Then, someone must file a petition asking the court to confirm the validity of the will and appoint a personal representative or executor. Several documents must be filed at this time, including the original will, date and time of death, proof of authority to petition the court, and paperwork confirming no other probate requests, competing wills, or whether a bond is required or specific notices must be sent. In this process, the executor must accept the court's jurisdiction and a judge authorizes that person to act on behalf of the estate.
Transfer of Assets Is Not Automatic
In a community property state, many believe that when a spouse dies, their assets automatically transfer to the surviving spouse. Community property laws create a presumption of equal ownership. During probate, whether or not there is a will, you still must affirmatively transfer the titles of all assets into the spouse's name. In Idaho, a probate must be filed within three years of death. After three years, there are additional paperwork and actions to transfer titles, which takes more time and money.
Use a Trust to Bypass Probate and Retitling Assets
When you create a trust and retitle assets to that trust, the death of a spouse does not affect ownership, so no probate is required. Either surviving spouse is the trust beneficiary, and the trust language dictates distributions. Since a trust needs no court review to take effect, there is no probate. A trust keeps your affairs private, and a trust settlement is never public record.