Probate is the court-supervised process where assets are collected, debts are paid, and then the remaining assets are distributed. A living trust is a document which lists how your assets will be distributed upon your death. A living trust avoids probate. The three main disadvantages of probate are listed below:
1. STATUTORY FEES
The personal representative and his/her attorney are entitled to fees by statute based on the value of the estate. The fee structure is as follows:
4% percent on the first $100,000.00;
3% on the next $100,000.00;
2% on the next $800,000.00; and
1% on the $9,000,000.00
So if your only asset is a home worth $600,000.00 and your estate goes through probate, your estate will have to pay $15,000.00 in fees to the personal representative and $15,000.00 in fees to his/her attorney. There are also filing fees and other costs associated with probate.
But on the other hand if you had a trust, then the attorney would be entitled to fees he/she incurs on an hourly basis and the trustee would be receive reasonable compensation which is typically 1% of the beginning assets plus extraordinary fees, if applicable.
2. TIME
The probate process takes at least 9 months to one year. The time frame to close an estate can be even longer if there is litigation.
The trust administration process does not involve the court unless there is litigation so assets can be distributed in a few months.
3. PUBLIC NATURE
Since probate is a court-supervised process, your assets and testamentary documents will become public record.
In trust administration since there is not court involvement, your assets will be kept private unless there is litigation.