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Avoiding Probate
By Michael J. Mc Guire, Attorney at Law
This article is designed to give the reader a little understanding about what the probate process is and is not and why it is preferable to avoid it if possible. The first thing you should know is the two purposes of probate:1) to pay-off the just debts of the decedent (deceased person); and,
2) to distribute what is left of the decedent's estate to either: a) those people, and in those amounts, as are named in the decedent's will, or, if the decedent did not leave a will, then b) the probate court will determine who are the rightful heirs of the decedent.Having a Will Does Not Avoid Probate
So, the first thing we have learned is that writing a will is not a means of avoiding probate; it is simply a legal way of informing the probate court of your intentions for your estate after you are no longer around to give instructions. Sometimes a probate court will determine that your instructions cannot be followed. Usually this will be because some of your survivors are fighting over the appropriateness of the distribution you had planned. We cannot in an article of this nature discuss all of the possible situations which might arise. What you should know is that the court has the ultimate power to make determinations, considering your wishes, the law of your state, and the arguments of the lawyers who represent the greedy group of relatives you've left behind.
If you would prefer to rest in peace, you should consider a Living Trust. A Living Will is something different, which we will discuss below. A living trust is a document by which you declare that your assets will be distributed according to a plan you determine and without any necessity of a court's intervention. You are creating something like a holding company for your assets. You may declare that while you are alive you and your spouse are in control of all of your assets, exactly as you now are. Upon your passsing, or your spouse's, the survivor is completely in control. You also name some successors who will be in control upon the passing of both you and your spouse. You will direct that upon the passing of both spouses, this named successor (or successors) will distribute your property according to plans you have written down.
The successor trustee, as he/she is called, has full power to simply sell all of your assets and distribute the proceeds as you have instructed--virtually any distribution plan is possible with very few exceptions which your attorney will avoid. Now, either a will or a trust instrument can be challenged in court after your demise. However, trusts are generally not challenged because the assets will almost always be distributed before anyone thinks to challenge the matter; whereas, during the probate of a will, all the assets are tied-up in court making challenges more likely. Compare the probate process and the living trust process described below.
If you write a will properly and leave it where someone knows about it, the executor named by you to execute, or carry-out, the terms of your will must apply to the Superior Court to have the will approved and its terms fulfilled per your instructions. Generally, your executor will need to hire an attorney to help complete the entire process. It is very difficult to figure-out what needs to be done without the services of an attorney. Most states, California included, will set a standard percentage of your estate as the attorney's fees for this. If there is any real estate to sell, there will be extra fees to pay. If there are any complications or court battles beyond the common ones, there will be extra fees to pay. These are referred to as extraordinary fees (and boy can they be!) and they will be paid in addition to the standard fees. The executor will be entitled to receive a similar amount as fees for his/her services during the probate process. All of these fees will be taken out of your assets before any distributions are made.
The paperwork filed informs the court that you have passed away and that you have left a will and that you have named the executor to serve in that capacity and asks the court to approve of the starting of the process. The paperwork in California is called a "Petition." The executor will place ads (the attorney takes care of this usually) in the paper announcing to the world, and in particular, interested parties to whom you might owe money, that you are gone and that unless they step forward and prove that you owed them money, all your assets will also soon be gone.
The executor's job is to find all of your assets and determine what debts you have remaining (from facts they are able to gather, and from any claims made against the estate). Once your assets are gathered and your debts (including any taxes owed) are paid, and the statutorily required time period elapses (six months in California) your executor will ask the court to approve the final distribution of your remaining estate.
This process takes no less than six months, generally it is not completed before nine months, and although the court has a goal that it should not take more than one year, it often does. Note that at anytime during the process, anyone can make a claim against the estate or object to the appointment of the executor you've chosen, or object to the actions of the executor or object to the distribution plan. Not one dime will be distributed until the court approves it, the entire process is a matter of public record for anyone to review, so anyone who thinks they might have a right to some of your assets has everything to gain, and nothing to lose, by filing their claim or objection with the court and taking their shot.
Unlike a probate, a trust can remain completely private if you so instruct your attorney and your successor trustee. Right now, you're in charge of everything you own. If you want your money, you walk into the bank, sign a withdrawal slip and they hand you the money--because your signature is on the signature card. If you were gone tomorrow, no-one has access to that money because you left no instructions. If you left a will, the probate court will give your executor the power to get that money, but only after the long probate process. You could, of course, put someone else's name (your child, for example) on the account, but then the money is half theirs. Perhaps you trust them not to spend it while you're alive, but what if they are sued for something and a judgment is entered against them? Then the judgment creditor will be able to execute his judgment against your account.
The best situation is to have all of your assets held in the name of the trust. It is often called a Living Trust, because while you're alive you are the person in charge of it and all of its assets--just as you are today. Then when you die, the trust lives on. The person you have named as successor trustee simply follows the directions you have left and distributes your assets as you have directed. No muss, no fuss, no executor fees. By the time someone comes along to fight over the money, it's been distributed. Now understand, your debts must still be paid, including applicable taxes. There are ways to reduce the tax burden in certain circumstances. Any trust and probate lawyer in your area will be aware of these particulars.
This is completely separate from either a will or a living trust. It is usually contemplated, however, at the same time that you are drafting any of your estate planning documents. It is an instrument by which you inform your family and your medical providers about how you would like to be treated in the event of a catastrophic illness or accident, or during the last days of your life. For example, you might not want to be kept on life-support systems if the doctors have determined that there is no hope for survival without the machines. Since you are not able to speak for yourself at that time, the doctors are not able to disconnect the machines unless you have given the power to make that decision to someone else.
In California we have a "Power of Attorney for Health Care." Many states have drafted a similar, legally approved document for this purpose. In this document you can set forth specific medical procedures you would approve of and which you would not, or you can simply state that your "health care agent", the person named by you, has the power to make those decisions for you. I recommend these documents to all of my clients and I recommend that after you sign it you discuss it with your family and your doctors so that everyone knows you feelings and your wishes and what you've done about it.
These so-called living wills have gained in popularity and now are being used for more than just health care instructions. They are seen as a very good vehicle to inform your loved ones of your thoughts and wishes in your final days. You may have heard about a document called the "Five Wishes Living Will." This is a very informative document, but it is not legally enforceable in California. Please see the accompanying article entitled "Living Wills" for a more detailed discussion of these versatile and important instruments.
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