Many high-net-worth individuals and executives know they need an estate plan to help ensure their loved ones are financially secure and successful after their passing. But surprisingly, few people know how inheritance actually plays out.
An estate gets passed down through probate, a process that is neither simple nor well-understood. In fact, according to a recent report in USA Today, less than half of Americans know that inheritance is not automatic.
At Peak Financial Group, we work with families and executives to develop estate planning strategies that coordinate with financial plans and help family members navigate the frequently confusing and complicated probate process when the time comes. Here are the key details you need to know about probate.
Probate Takes Longer Than You Think
Based on the Trust & Will 2024 Probate Survey, the average probate process takes 20 months. (Only two percent of those surveyed accurately estimated the average length.) What takes so long?
While the specific rules and regulations of probate vary from state to state, the process generally plays out in a similar way. If the value of an estate is below a certain value, probate may not be required; however, in some states, anything more than $3,000 must be probated; in others, the limit is as high as $200,000, according to Investopedia.
Assuming the decedent has left a will, the person named as executor will begin to administer the will. This involves notifying the probate court, which will oversee the process. Once probate formally begins, the executor is required to determine the total value of the estate, pay off any outstanding debts, and then begin the process of distributing the estate according to the will. Since a court oversees this process every step of the way, it can get time-consuming.
Probate Costs More Than You Think, Too
Now that you know how long probate can take, it may not surprise you to find out that it can be costly, too. According to some analyses1, probate can end up costing between three and seven percent of the estate’s total value by the time court fees and legal fees are all put together. That’s all the more reason why having a clear will and estate plan is important. The clearer the estate plan, the simpler you end up making the eventual probate process.
How to Begin Discussing Inheritance With Your Family
According to USA Today, less than 60 percent of millennials have discussed estate planning with their older relatives. And most millennials don’t have a will or trust of their own.
While it can be uncomfortable to initiate discussions with loved ones about what will happen once they pass away, it’s critical for both older family members and their children to truly understand how the inheritance process works.
Prepare for the Future Ahead
At Peak, we can help families have these discussions so that after a lifetime of smart financial decision-making and planning, there aren’t any unwelcome surprises. While we can review estate planning documents and provide estate planning strategies, we do not offer estate advice. Get in touch with us today to learn more about how we can help families navigate all the steps of the inheritance process.
1 Estimates made by estate planning attorneys and CFPs who have written extensively on the topic, including Chris Nudo, Margarita Cheng, and Philip B. Shane, a professor at College of William & Mary – Raymond A. Mason School of Business. Source: https://trustandwill.com/learn/2024-probate-study.
Osaic FA, Inc. and its representatives do not offer tax or legal advice. Individuals should consult their tax or legal professionals regarding their specific circumstances.
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