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We Suggest Two Positive Things About Probate — But Not Too Vigorously

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SEPTEMBER 24, 2012 VOLUME 19 NUMBER 36
Two weeks ago we wrote about why you might want to plan your estate with an eye toward avoiding probate. We hope you concluded, with us, that the probate process may not be as onerous as one would believe based on its bad reputation. We concluded with a promise that we would next try to identify any reason you might actually want to be sure that your estate “goes through” probate.

Then life (in the form of a family visit and a trip to the fantastic ruins at Chaco Culture National Historic Park) intervened, and we missed getting back to you on this topic. We do hope no readers are inconvenienced by what we are sure was growing dramatic tension.

We’re back and ready to address the positives about probate. “It isn’t as bad as you think” simply is not enough to recommend the probate process, and so we need to lay out all the affirmatively good things that can happen by virtue of having your (or a family member’s) estate subjected to probate. We think we will be brief.

We can think of two positive things arising from the probate process. Others might quibble (and in fact we hope they do — comments are solicited below) and insist that we have overlooked a third, or even a fourth. But the truth is that there are not many affirmatively good things flowing from a probate proceeding. Here are our two:

1. Creditor protection. If your estate goes through the probate process, there is a formal mechanism for giving notice to creditors and giving them a short time — in Arizona, four months — in which to perfect their claims. At least in theory (there are some exceptions) that means you can cut off unknown creditors fairly quickly after a death, and their claims do not linger to be asserted against heirs months or even years later. This feature of probate is often particularly attractive to doctors, lawyers, architects — any professional who might conceivably be sued for malpractice.

This “benefit” is often illusory, however. In Arizona, and in a growing number of other states, you can give creditors notice (by a combination of mailing and publishing in local newspapers) and cut off claims not made within the same four-month period even if no probate has been filed. Check with your local attorney to see if your state has a similar provision.

2. Judicial finality. What we mean by this is that, particularly in contentious family situations, the person administering your estate might actually benefit from the knowledge that once a probate judge has decreed that everything was done correctly, unhappy heirs are cut off from pursuing additional legal proceedings.

This, too, is somewhat illusory. Suppose you choose to establish a living trust to avoid the probate process, and your successor trustee wishes she had access to the courts to make sure her siblings don’t threaten to act for months or years after your estate has been settled. Well, your successor trustee can choose to submit your trust to the probate court’s review, just as if there had been a formal probate proceeding.

In our experience, family members tend to overestimate their ability to get along with siblings and others affected by the handling of your estate. It might be that your daughter, whom you have named as successor trustee, chooses not to seek probate court approval — and later regrets it when your son challenges everything she did months or even years later. But, as we say, this is a fairly faint recommendation for a decision to force your estate through the probate court.

So how do the pluses and minuses stack up, and what do we think you should do about it? Here’s the executive summary:

There are very few cases in which administration of an estate will not be simpler and less expensive if a living trust is established — and fully funded — rather than requiring that the estate go through the probate court and process. Though there are some theoretical benefits to probate, they tend not to be too compelling in individual cases. But the real test is a cost-benefit analysis: will your family save enough (cost and hassle) from your decision to establish a living trust to justify the increased expenditure by you, right now?

As part of that analysis, how likely is it that the estate plan you create today will be the one in place when you die? In making this calculation, remember that most people really do need to revisit their estate planning documents about every five years, or even more frequently.

As you review this material, please remember two things:

  1. We live and practice in Arizona. Not every state has the same relatively simple probate process, but in some states probate is even simpler and less expensive. That means that the cost-benefit analysis we describe has to be made in your state, preferably in consultation with an estate planning attorney familiar with your state’s law and practices.
  2. Reasonable minds can and do differ. Few things generate the heat and passion among estate planning attorneys (we tend to be a pretty mild bunch) that you can get from the “do you need a living trust” question. We’ll post pretty much any response we see from other practitioners or regular folk, but ultimately you need to talk to a local attorney and get the straight scoop from her or him before making a final decision.

3 Responses

  1. Suppose that one has gone to great lengths to avoid having a probateable estate: named insurance beneficiaries, named retirement account beneficiaries, payable-on-death accounts, beneficiary deeds, etc., is there any unavoidable trigger amount or kind of personal property that would nevertheless require probate?

    It would be nice not to have to set up and fund a Living Trust.

    Thank you,

    — James Hays

    1. Mr. Hays:

      In Arizona, up to $50,000 of personal property (including bank accounts, vehicles and household effects, assuming that they are in the decedent’s name alone) can be collected by a simple affidavit procedure. Setting up “POD” (payable on death) accounts and beneficiary designations can be an alternative to a living trust — but it does require more effort to maintain those account titles over time.

      Other states have similar arrangements, but we can’t tell you the dollar amount for any given state. Some are more than and some less than Arizona’s number. Arizona (I think perhaps uniquely) also has a summary procedure available for real property with a net assessed value of less than $75,000, but it’s not quite as simple as the personal property affidavit.

      Robert B. Fleming
      Fleming & Curti, PLC
      Tucson, Arizona
      http://www.FlemingAndCurti.com

  2. Most of my estate plans are traditional wills requiring probate. I don’t disfavor living trusts; I just don’t see a compelling reason to have them for most clients. I recommend them for people who would like professional investment management, assistance with bill-paying and handling finances especially when they don’t have trust family members nearby. I also recommend living trusts when clients have out-of-state property, sometimes a simple trust just for the foreign-state property.

    People understand wills and probate, and are less fearful of it when I explain the process and that the vast majority of probates are informal under the UPC, and we charge hourly fees to handle them. The cost after death is a little less with living trust windup, but higher to set up and fund; the total $ is pretty much a wash in our practice.

    The biggest disadvantage I see with living trusts is lack of followup when the clients serve as their own trustees. Despite firm advice and assistance confirming full funding, even the best and most reliable of my clients end up having some probate assets at death; they either forget about some real property like mineral interests, or minor no-producing real property that can’t be collected by affidavit. I recommend that clients use corporate trustees if I can get them to accept the idea of trustee fees – trusted children or other family members just don’t understand fiduciary duties, and don’t handle post-mortem administration without a lot of legal help, which is much like probate.

    Thanks as always for your weekly newsletters. I use them as examples often to explain potential problems to my clients.

    Dan N. McLean, Esq.
    Helena, Montana

Robert B. Fleming

Attorney

Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman

Attorney

Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson

Attorney

Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

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Matthew M. Mansour

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Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.