The Purpose of Probate
The purpose of Probate is to transfer title to all of your assets into the name of your heirs and make sure that all other legal claims against your Estate are considered and paid. Each state sets a minimum asset level, below which there is no Probate. But this level is so low in most states that virtually anyone who owns their home is assured of going through the Probate process. Owning $20,000 worth of real estate in California and Tennessee throws you into the Probate process, and most states have similar laws. Furthermore, the Probate process must remain open for a minimum of 6 months and can run as long as 3 years. Many contested estates have remained in Probate for decades while Probate expenses reduced fortunes to a pittance. The only people who won in those cases were the Probate attorneys who were being paid from the estate assets.
The Cost of Probate
As one legal scholar so aptly put it, “The legal costs of Probate expands to consume the money available.” Although this was most certainly said with tongue in cheek, the remark was intended to encourage the legal profession to reform a system that has become shamefully excessive.
Some states have statutory limits to what fees can be charged, and other states leave this task to self-regulation within the legal profession. Additional excessive extraordinary fees are often requested by attorneys and allowed by the court. Overall, it is not unusual to see total Probate fees fluctuate between 8% and 15% of the gross market value of all assets in the Estate. Yes, we said GROSS! Probate does not take debt into consideration when it calculates its fees. For example: You can own a $200,000 home and owe a mortgage of $150,000, holding $50,000 in equity. Probate will assess fees based on the entire $200,000, or a likely Probate fee of $20,000 to $30,000 just on the home! And once you are into the Probate process there is no turning back. It must run its course, and while it is grinding on, the heirs have absolutely no access to the assets or property in the estate, except through the rare compassion of the Probate court. If you own property in more than one state that property must go through Probate in all states where you own property if its value is above that states probate limits.
The Myth of Avoiding Probate
Even though there is no acceptable way to avoid Probate, except through the use of a Living Trust, people often tell stories about friends and relatives who have managed to avoid Probate. Such occurrences are almost always false or the situation misunderstood. The Probate process can be delayed after death, but it cannot be avoided entirely. A deceased person cannot sign off on an asset they once owned. When that asset is sold, and that could be years later, it will take the Probate process to remove the deceased’s signature and ownership interest from the asset. That’s when exorbitant legal fees will be encountered, since it is very hard to go through Probate without the assistance of an attorney. Many attorneys will advise people that they don’t need a living trust using the estate tax exemption as a justification for this advise. This is either ignorance on the part of the attorney or a deception and should not be taken seriously.
There Is Good News
The good news is, Probate is completely unnecessary for most people! That’s right! A properly-funded Living Trust can completely avoid the costs and delays created by Probate and literally allow the successor trustees and heirs to settle the entire estate in a matter of weeks without the interference of the Probate Court. It’s that easy. One prominent well known estate-planning attorney said that attorneys who draw Wills for clients, and knowingly subject them to Probate, should be sued for malpractice.