When it comes to estate planning conversations, many clients come to the table with the goal of avoiding the probate process, which can trigger images of a lengthy legal process that unnecessarily slows the distribution of a deceased individual's estate. Relatedly, when some or all of a decedent's assets do go through the probate process, it is sometimes seen as a 'failure' of estate planning. In reality, probate is often a normal and necessary part of estate administration, even when planning has been done well.
To start, probate is not a punishment for failing to plan; rather, it is the statutory estate plan that applies to every resident of a given state. Probate serves as infrastructure for establishing who has legal authority to act, clarifying ownership of assets following a death, providing a process for identifying and resolving claims, and creating procedural deadlines and guardrails to ensure an estate is settled with finality.
Notably, probate procedures vary by state and the complexity of the estate, so the probate experience can be quite different depending on a decedent's particular circumstances (ranging from a simplified process to one with expensive court supervision and more cumbersome administrative requirements). Nonetheless, for certain clients, the public nature of the probate process can be a bigger concern than the administrative burden.
To attempt to avoid the probate process, some clients set up trust structures that bypass probate. However, doing so doesn't mean avoiding the need for administration, which requires many of the same tasks as probate (e.g., identifying assets, valuing property, and transferring ownership). In effect, trust administration functions as a 'private' form of probate, operating outside the court system but subject to similar responsibilities and risks.
Even when estate planning is done 'well', individuals can still be exposed to the probate because of what happens (or fails to happen) after documents are signed. Such issues include acquiring assets after their estate plan is completed (and not coordinating ownership and beneficiary designations), inconsistent titling, digital and intangible assets (e.g., online accounts, intellectual property, and social media accounts), and out-of-state property (which can trigger "ancillary probate" and the possibility of multiple probates in multiple states). There are also cases (e.g., when family conflict exists, when a guardian must be appointed, or when there are creditor concerns) where going through the probate process might be preferable to private administration, given the structure and clarity it can provide.
For financial advisors, the value of probate literacy is in part a matter of client expectation management, because if clients have been conditioned to believe that probate equals planning failure, the presence of probate can trigger frustration, distrust, and/or confusion. Conversely, if probate has been explained as a normal part of the process that may apply in certain circumstances, its occurrence is less likely to feel like a shocking surprise. Also, understanding probate can allow an advisor to serve as a 'central coordinating figure' after a client passes away, reducing uncertainty and smoothing the asset transfer process for the client's survivors and beneficiaries (allowing the advisor to build trust with this group throughout the process).
Ultimately, the key point is that by shifting estate planning conversations from "avoiding probate" to "coordinating administration", advisors elevate the discussion and set realistic expectations that can mean a better client experience and a higher likelihood of maintaining the relationship intergenerationally!
