Misconception #1: A Will avoids probate. No. A Will is the primary tool of the probate system. Your Will is like a letter to the Court telling the Court how you want your property distributed. Then you must make sure that you prove to the Court that all your property is collected and appraised, and all your bills and taxes are paid, before your property can be distributed to your heirs.
Misconception #2: A Testamentary Trust avoids probate. No. A Testamentary Trust is a Trust contained within a Will that holds property for a specific purpose. For example, one purpose would be to hold property until minor children turn 18, when they can legally own property — or until children reach the age when you believe they are mature enough to responsibly handle the property. A Testamentary Trust is not a Revocable Living Trust. It is part of a Will and takes effect only when the Will is probated.
Misconception #3: Probate costs and the costs of administration of the estate are small. Not necessarily. Such costs can be very substantial. The real problem is, no one can tell you how much the costs will be until the probate has been completed, which often can take several years. The biggest portion of the costs are the fees charged by attorneys and personal representatives for their services for the estate, in addition to filing fees, costs of publication, fees for copies of death certificates, filing and recording fees, bond premiums, appraisal and accounting fees, and more. Often the fees of personal representatives are based on an hourly rate, and while they can tell you what their hourly rate is, they cannot tell you the number of hours their services will take, so they cannot tell you what their total fees will be. Like surgery, probate can be simple and easy, but frequently probate can have drastic and damaging results. Accordingly, like surgery, because of its uncertainty in terms of both the potential for problems and high costs and fees, probate is something best to avoid if you can.
Misconception #4: Property can be distributed according to the terms of your Will in only a few weeks. In Minnesota, the administration usually takes 12 to 15 months. During this time, the deceased person’s property must be inventoried and appraised. Heirs must be notified. Estate and inheritance taxes, if any, must be paid. Contested claims, if any, must be settled. Creditors must be notified and paid. If all of this is not done before the estate is distributed to the beneficiaries of the estate, the personal representative will be personally responsible for those claims. As a result, most personal representatives won’t distribute property until they are sure all claims have been settled.
Misconception #5: Your Will and your assets remain private. No. Because probate is a public legal proceeding, your estate may become a matter of public record. This means that anyone — including nosy neighbors and salespeople — can go to Court to find out the balance in your savings account, the value of your stocks, even the appraised value of your diamonds.
Misconception #6: A Will helps you avoid taxes. No. A simple Will does nothing to lower your taxes. A Will simply tells how you want your property distributed, and who you want to act as guardian for your minor children in case you and your spouse die in a common accident. A skilled lawyer can use a Will to plan complicated estates that require tax planning, but the cost of the complex plan will be comparable to the cost of a Revocable Living Trust plan. Plus, the Will-based plan will still have to go through probate.
Misconception #7: Your permanent fami