Elder Law - Len and Rosie


Probate – good news, bad news

Dear Len & Rosie,

I’d like to know the difference between a will and a living trust, at least as it pertains to my situation. I’m single, no children, and do not pay a mortgage or own a home. All my assets are with major financial institutions. Aside from that, I own my car and some furniture and jewelry. If anything were to happen to me, I want to be sure my beneficiaries receive the assets I designate to them, with the least amount of hassle and no taxation. My net worth in today’s market is under $200,000. Any recommendations?

Marian

Dear Marian,

The only difference that matters between wills and trusts is that trusts avoid probate. If you create a revocable trust and transfer your accounts into it, then upon your death your trust will survive you. A successor trustee you appoint will take over the administration of your trust, pay your bills, and distribute your assets in the manner provided for in your trust document. If you were to die with a will instead of a trust, the same thing will happen. Only instead of a trustee, you’ll have an executor, and the administration of your estate will be supervised by the court in a process the law calls probate.

The downside to probate is that it takes a long time. The reason why is that there are two required court hearings, each with a 30-day notice period, as well as a 120-day creditor claim period in between. That’s six months, and since you never get a court hearing date as soon as you would like, probate usually takes a minimum of nine months to complete.

Probate also costs more than dealing with a trust. Probate lawyer fees are set by state law. If your $200,000 estate were to pass by probate, a lawyer somewhere will earn $7,000 in legal fees. If your investments increase in value to $500,000 before your death, the lawyer will earn $13,000 in statutory probate fees, for doing exactly the same amount of work. Probate is a bit of a racket for lawyers.

But probate isn’t necessarily bad. Trusts costs more than wills to create. People without children are not as likely to be concerned about the cost of probate, because it’s a bill that’s not paid until after they have passed on. And the court supervision of probate can be a good thing, especially if you are worried about a trustee you may not trust so much running off with your assets after your death. A lot of attorneys will tell you that you absolutely need a trust. We prefer telling our readers and clients about the available alternatives and letting them decide.

In your case, you probably don’t need a trust. You can name pay-on-death beneficiaries for your various accounts, and if you keep the total amount of assets in your name alone without designated beneficiaries or joint tenants under $150,000, there won’t be a probate after your death, even with a will. Your beneficiaries will be able to collect anything left in your estate forty days after your death using small estate declarations.

You should still make a will, so that there’s no ambiguity as to how your want your assets divided after your death. You should also have a Durable Power of Attorney and an Advance Health Care Directive so that people you trust can make important legal, financial and medical decisions for you if you should ever become incapacitated.

Len & Rosie

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, by phone at 707.996.4505 or Lentillem.com.

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