What is Probate?
In New Jersey, probate is the process by which a person becomes the personal representative of a person’s estate.
When a person passes away, someone has to step up and take care of everything that the person left behind. The person who died is called the “decedent.” The person who steps up is called the personal representative. Everything that is left behind is called the estate.
The personal representative might be an executor who is nominated in the decedent’s will, or they might be an administrator who is allowed to apply under the statutes.
The person who wants to step up as the personal representative completes the application in the local County Surrogate’s office. If everything is in order, the representative will take an oath and be sworn in and designated to act on behalf of the decedent.
Why you might want to avoid probate
If there is a will, then that will becomes part of the public record when the person seeking to become the personal representative applies to be appointed. Once the will becomes a part of the public record, anyone can get a copy by requesting it from the court and paying the appropriate fee.
Depending on your family dynamics, how complicated your estate is, or how much money or property you left behind, you might want to avoid probate. If you have a blended family, you might want to prevent your last wishes and will becoming public. If your will becomes public, any favoritism you might show by your devises, especially if you leave unequal amounts to different children, will become known. If you own a business, you might want to avoid probate because you want to maintain privacy in your business affairs.
The main reason a person wants to avoid probate is to avoid knowledge of what they own and who they leave it to from becoming public. If large inheritances become public knowledge, young heirs might become victims of false friends, crazy schemes, or other false creditors demanding payment.
Why you might not want to avoid probate
Probate isn’t all bad, and there are reasons to go through the probate and estate administration process. It’s important to distinguish between probate and administration. Most often, you hear that you want to avoid probate, but you never hear that you want to avoid administration. That’s because estate administration is a well-defined process by which creditors are paid, and heirs receive their inheritance.
While estate administration can be a lengthy process, most estates are relatively simple. For simple estates, it can take anywhere from a few days to a few weeks to gather all the information correctly. The lengthiness of the administration process has to do with statutory guidelines and restrictions on when inheritances can be distributed among beneficiaries due to creditor waiting periods.
In Pennsylvania, there’s a one year from publication creditor waiting period during which time, a personal representative should not distribute any inheritances. Likewise, in New Jersey, there is a minimum six-month creditor waiting period. If the personal representative distributes any inheritances during this period, the personal representative becomes personally responsible for the decedent’s debts. Yikes!
This creditor waiting period is the most significant benefit of going through the estate administration process and NOT avoiding probate. A person’s responsibilities for their debts does not end with their death, so the administration process puts a strict deadline on the time for creditors to get paid. If the creditor misses the deadline, they miss their shot at getting paid.
Administration also helps ensure that your final wishes are carried out. Although there is little court supervision in New Jersey and Pennsylvania estate administration, the courts provide a pretty big backstop if anyone tries to mess around with the distributions. The personal representative can apply to get the will clarified and the distributions set if beneficiaries are questioning the amounts, the will, or anything else. Similarly, if a beneficiary does not agree with how an estate is being administered, the beneficiary can apply to the court to get access to the records of the administration.
Ways to avoid probate
If you are set on avoiding probate, the only way to do that is by not owning anything in your name when you die. Since you don’t know the date of your death, it can be difficult to divest yourself of all of your belongings before you die. The most common ways that this is done is through a living trust, a business entity, or co-ownership with rights of survivorship. However, each of these methods to avoid probate can have significant tax consequences and should not be attempted without the advice of an attorney and a licensed accountant.