If You Can Find a Way to Avoid Probate, Do So
By Daryl Binkley, Estate Planning Attorney
"There's hell, and then there's probate"
- J.J. Childers from his book 'Asset
Protection 101'
To me this is a joke that makes me smile and
cringe at the same time. In the text, Mr.
Childers goes on to add that "thanks to the
probate process you probably wouldn't wish the
job of executor on your worst enemy." Yet
individuals who have a modest amount of real
property titled in their name alone, and
procrastinate away their estate plans, will lead
their loved ones straight to a government
imposed estate plan in a system, that's well, a
hell.
While the joke may seem exaggerated and
extreme, it certainly rings true for people I
talk to that have experienced nasty probates,
especially contested probates.
In my practice, the topic of probate brings
up a lot of concerns by people that come to meet
with me, in fact, questions about probate are
some of the most common ones I receive. Some
people have no idea about what probate involves,
others have experienced it first-hand and become
quite versed in the procedure. I find that many
people know enough that they want to avoid it,
but then have some misconceptions as to what
will avoid a probate.
First, as already stated in the opening
paragraph, if you have a modest amount of real
property in your name alone, for example, a
house worth $120,000.00, then having no estate
plan means you have opted for the government's
plan of distribution - probate. So if you think
you have no estate plan, that's Ok, the
government substitutes one for you - formally
called probate. However, if you are the same
individual with the same home, but have
formalized your estate plan with the use of only
a "Will" then guess what - you still will have a
probate.
Misconception about "Wills"
From my experience, I find many people expect
that a Will will avoid probate. A Will will
not. I like to clarify the misconception with my
own joke - that if you are single and have
modestly valued real property titled in your
name alone (i.e. as an individual), then
generally speaking, having a Will alone is
like having front row tickets to the probate
court. Of course, as most of my jokes, it is not
that good, and the reality is much worse.
If you have never heard of probate and are
not sure what it is - the simple explanation is
that it is a government process or system
administered through the courts that helps in
the orderly distribution of your assets after
you have passed away (of course making sure that
creditors and various governmental agencies get
paid, too). The probate plan works if you do not
have an estate plan (assuming you have assets of
a certain value and titled in your name alone),
but it even controls estates where the decedent
left only a Will as their main estate planning
document.
Some states are considered probate-light,
where the fees related to probate and procedures
are not as extensive and time consuming, at
least so I have heard, but California is not one
of them.
Four things you should know about probate:
1) Cost: Probate costs are based on the size
of the estate, and there are statutory fee
schedules for attorneys and executors to charge
certain amounts, and on multi-million dollar
estates, legal fees are usually held to a
'reasonability' standard. Of course, there is an
opening for extraordinary legal costs when
contests come up.
2) Time: For estates with a modest amount of
assets, a probate can easily take 2 years or
more, and even longer if a contest arises.
Hopefully, if you have a smaller estate and have
no disputes, then maybe a probate could be very
fast at a year to 18 months. Recently I met with
someone that has been going through a probate
for almost the last 10 years due to contests.
The legal fees in these contests reduce the
amount that your heirs will eventually receive.
3) Loss of Control: a judge you have never
met or who doesn't know you or your family will
be ultimately making decisions as to how your
assets would be distributed. As we all know,
someone might look great on paper and might seem
like the obvious choice to be an heir of your
estate, but it may not be the person you would
choose to receive your assets.
4) Loss of Privacy: Your family matters
(think dirty laundry in the soap opera
context) and potentially the extent of your
assets could become part of the public record.
Four tips on avoiding a probate:
1) Trusts: Generally the most efficient and
the most recommended way of avoiding probate is
through the use of a Trust. There are costs
associated with creating a Trust and
administering a Trust but these are usually
significantly less than the costs of a probate.
2) Proper Titling: Titling assets in a
non-probate form, generally married couples have
a lot of options to avoid probate if one spouse
passes away - of course the danger to those forms
is if both spouses are killed in an accident at
the same time - two probates!
3) Gifts: Gifting your assets during your
lifetime.
4) Live forever!
Of course, California is trying to do more to
make probate a more effective system, but why
not just avoid it, if possible?
Daryl Binkley is a local
estate planning attorney in Palm Desert. He can
be reached at
daryl@binkleylaw.com .
For more information please visit
BinkleyLaw.com
This article was previously published by the
Desert Sun on December 2, 2009
