How to avoid probate?
That question, or some variant, is usually the first one I hear from estate planning clients. The mythology about probate has taken hold of the popular imagination, and most people think that's what it is all about.
Not so. In most states (but not in all), the probate process has been modernized substantially, and the cost, time and loss of privacy are nothing like what clients have been told to anticipate. There are even (dare I suggest it) some positive things about probate, at least in some cases.
First, a little history. From the early days of the Anglo-American legal system, the probate courts, probate lawyers and the probate process itself have often been seen as rapacious. Candidly, it was a reputation not entirely undeserved--at least, not undeserved in 1966, when Norman F. Dacey's book How to Avoid Probate first electrified readers and then the legal system.
Much has changed since Dacey's book. The Uniform Probate Code, an attempt to streamline the probate process in American states, was first promulgated in 1969, and has now been adopted in whole or in part by 18 states. One of the primary problems with probate--the requirement that an executor's actions be entirely supervised by the probate judge--was stripped away, and the costs, delays and hassles were immediately and dramatically reduced.
Still, there are 32 states which have not adopted the Uniform Probate Code. Many of them have moved toward a more modern approach as the probate world has shifted around them, but holdouts still exist. One major problem, addressed by the Uniform Probate Code but not adopted in every state, is the provision of presumptively reasonable fees for the attorney and for the executor/personal representative. In states with statutory fees, the cost of probate may be more expensive by a factor of three or more in most cases.
So far I've told you that probate isn't nearly as bad as you probably think it is, but I haven't told you why you should actively embrace the probate process. Truth is, there isn't usually a good reason to want your estate to go through the probate process, though there are couple of arguable exceptions. The real issue for most clients isn't whether they want to avoid probate--it's whether they want to spend very much money or energy seeking probate avoidance.
There are, however, at least two benefits from the probate process that some clients might want to consider. In most cases both can be obtained by other means, so neither is very compelling. But they are out there:
1. Creditors claims can be cut off. One good thing that happens during the probate process is that any creditor who fails to make his or her claim within specified time limits is forever barred from suing the estate or heirs. What's the big deal? If Sears, or Visa, or the phone company, want to make claims, can't they be counted on to take whatever steps are required to perfect their claims and collect? Yes, they can--but it is not necessarily the same for individuals who might sue for personal injury, or for professional malpractice. So one group of people who ought to think about the value of probate proceedings is those who are engaged in risky behavior, including professionals like architects, doctors, lawyers and accountants.
In Arizona, and in some other states, you can publish notice to creditors and get the same debt relief available from the probate process without having to go through an actual probate. In states where that is not the case there may be a significant value to the probate process itself--but at least in Arizona I have just set up an advantage only to knock it back down.
2. Family disputes can fester outside of court, but finally get resolved in court proceedings. In other words, if your estate goes through the (admittedly nominal) supervision of the probate judge, there is a date by which all family disputes have to have been submitted for resolution. Not so with trusts and other probate avoidance techniques--ill will and feelings of having been slighted or mistreated can linger indefinitely without any legal resolution. To be clear, I am not talking here about actual challenges--those can be filed against trust administrators with as much legal authority as they can be filed in formal probate proceedings. But if you anticipate that some of your family will harbor feelings of ill will, it might be in everyone's best interests to require a court's involvement and the closure it can provide.
OK--I don't think I have convinced you that probate is so wonderful that everyone ought to rush out and initiate one. I didn't really mean to. But I maintain that the real question isn't HOW to avoid probate, it is WHETHER it is worth the additional cost and energy to do so. For most people (and here I stress "most") the answer will be a qualified yes, but it is not a foregone conclusion in every case.
Caveat: if you live in a state (like California) where statutory fees are still the norm (and especially, in California's case, with the high cost of real estate driving up those statutory fees), or in a state (like Connecticut) where the probate process is still balkanized and, well, balky, your mileage will vary. You should get legal advice from a local practitioner. For some leads, look to the membership of the National Academy of Elder Law Attorneys, or the American College of Trust and Estate Counsel, or check with your local lawyer's referral service (the American Bar Association can tell you how to contact your local organization).
Robert B. Fleming
Fleming & Curti, PLC
Tucson, Arizona
www.elder-law.com
www.specialneedsalliance.com
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