In
the mid-1960s, a book called “How to Avoid Probate!” (exclamation and all) hit
the national bestseller list, and it stayed there seemingly forever. At one
point, it took over the No. 1 spot from another Sixties phenomenon, Masters and
Johnson's “Human Sexual Response,” prompting author “Probate!” Norman Dacey to
remark, “I don't claim, of course, that I made probate more interesting than
sex – it was just that millions of American families had had painful contact
with the probate system at one time or another.”
Probate
is the system set up in each state to administer decedents’ estates; the court
has jurisdiction to determine if a will is valid, decide on the validity of
creditors’ claims and resolve disputes among heirs – seemingly not very sexy
topics.
Nevertheless,
Dacey became something of a celebrity, a kind of legal Don Quixote tilting at
the windmills of the legal establishment. His book provided anecdotal evidence
of abuses of the system in many jurisdictions, creating a picture of “clubhouse
lawyers and judges” conniving to rob “widows and orphans” of their due.
In
some instances, the picture was accurate. One effect of the attention Dacey
brought to bear was a push for probate reform that continues until this day.
Many states have simplified their statutes and gotten rid of outdated and
unnecessary requirements.
Unfortunately,
nearly five decades after “How to Avoid Probate!” first hit bookstores, many
people still don't have a clear idea of what it is they're avoiding.
For
instance, many mistakenly equate probate with the estate tax system and incorrectly
assume if they “avoid probate,” their estates automatically pass free of estate
taxes.
Many
clients who come in to my office for estate planning tell me they think they
need to set up a revocable living trust to avoid probate.
“Why
is that?” I ask them.
They
don’t really know – they just know probate is bad.
After
we analyze their situation, we often arrive at the conclusion that a basic will
and durable power of attorney will address their concerns just fine, thank you
– even if it means their estate will go through probate.
There
are – believe it or not – some advantages to probate.
The
probate process was, after all, created to settle estates, to bring some legal
closure, particularly with regard to creditors' claims. If a personal
representative (or executor) publishes notice to creditors, any claims against
the estate must be filed with the court within four months of the date of the
first publication or they are forever barred by statute. (The same protection
is available to a “notice agent,” such as a successor trustee, who publishes
non-probate notice to creditors.)
The
probate court also can be useful in settling disputes among heirs, providing a
beleaguered personal representative with some authoritative backup in dealing
with squabbling siblings or other beneficiaries.
Under
Washington's relatively simple process, a personal representative settling an
uncontested estate with nonintervention powers granted in a will (meaning he or
she is not required to get court approval for most actions) can wrap things up
in a few months, with most of the estate passing to the beneficiaries – the
"widows and orphans" – and not to the "clubhouse lawyers and
judges."
But
if, after all this, you remain in the minority who are convinced probate ranks
up there with boils, locusts and thunder and hailstones among the plagues
visited upon mankind, let me suggest some strategies and a caution:
1) As
I wrote about a few weeks back, Washington now provides for “transfer on death”
deeds that transfer real property automatically on death without the need for a
probate. http://grayexpectations.blogspot.com/2014/12/tod-deed-piece-of-paper-that-could-keep.html.
2) Beneficiary
designations on accounts can help your heirs avoid probate. Setting up accounts
as joint tenancies with rights of survivorship or with “transfer on death”
provisions will allow them to pass without probate.
The
above mentioned probate-avoidance devices would probably help most people avoid
visiting the iniquities of probate upon their heirs, yea even unto the third
and fourth generations.
If
you opt for a revocable living trust to avoid probate, make sure all assets
subject to probate are transferred into the trust. This means deeding all your
real estate to the trust, and titling financial accounts in the name of the
trust, along with vehicles, boats – any substantial assets, especially those
registered and titled with the state.
What
happens if assets don’t get titled in the trust?
It
could mean the plague of probate will be visited upon your heirs after all.
We’ll
leave the boils, locusts, thunder and hailstones for another time.
For more basic information on the probate
process, the Washington State Bar Association's Web site offers a useful online
pamphlet as well as links to other estate topics such as revocable living
trusts, wills, etc:
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