Probate: The California Government's Estate Plan for Procrastinators

Posted on October 20, 2009 by Daryl Binkley

"THERE’S HELL, AND THEN THERE’S PROBATE” is a J.J. Childers, J.D. quote 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 substitute’s 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.  

Clearing Up the 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. 

4 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 reduces 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.

4 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?

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Lost Wills, Lost Trusts, and Missing Estate Plans: Sending Your Heirs on a Treasure Hunt

Posted on October 1, 2009 by Daryl Binkley

Very frequently I receive calls from people who are trying to locate a will or trust of their parent or loved one(s) who just passed away. They are not able to locate any trust documents or have any information about the attorney who created it. Once, after doing some research for a particular family, I found out that the attorney who created a trust had passed away before his client (then there was the job of finding where the deceased attorney's files went).

There are numerous cases of "lost wills."  My personal favorite is digging around a person's property after they passed away, looking for a will that was supposedly buried in a container.  Maybe a myth or legend, but it sets a graphic image.

Just this week I have a received a few phone calls about this exact issue. Families were trying to locate local attorneys who worked on trusts for loved ones by calling every attorney in the area. These random inquiries from other lawyers or loved ones make me think this is a problem for many people, or it might be down the road. 

So what are some possible solutions for this problem? The following are tips to ensure that you or your loved ones do not fall into the abyss of lost documents: 

Tips for Couples or Individuals Creating a Trust

  • Give basic information that you created a trust to at least one or some of your loved ones. If you feel comfortable you might want to let them know of your wishes, desires and reasons why you made specific decisions about your assets.
     
  • If your beneficiaries are also trustees, provide them with information on where the trust is located (especially if it is locked in the safety deposit box) and information on what they need to do if something is to happen to them.  Also provide them with the contact information or business card to your attorney that drafted the trust. You might want to give a copy set to your trustee so they know all the details.  Attorneys will have copies of client trusts in their files as well.  
  • If you don’t want your kids or beneficiaries to know the exact location of your trust or what the contents of the trust are, at least ensure they have contact information for the attorney that created the trust. Without this basic information, your kids /beneficiaries might be calling every attorney in the area trying to find this information. Or worse, they may need to pay another attorney to help them with this search.

Tips for Beneficiaries/Trustees of a Trust:

  • Have a heart-to-heart talk with your parents or loved ones about their wishes and desires on how things should be handled in the case they are not around. If your parents don’t have any legal documents set up about their health care decisions and assets, you may want to suggest that they seek an estate planning attorney. Ask your friends and/or professional advisors for references or recommendations.

  • If you know that your parent(s), loved one(s), or partner(s) have created a trust and that you are a beneficiary, ask them for the attorney contact information. 

  • If your loved ones are comfortable with it, they might even tell you where their estate planning documents are stored or even give you a copy of it.

 

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