You Need to Understand Probate
Every adult should know what probate is, and in most cases, these situations apply to individuals who are over the age of sixty. In today’s report we’re going to talk about the concept of probate and exactly what it means to aging parents as far as estate planning is concerned.
Understanding Probate – What Does it Do?
As we dive into our explanation so you will understand probate, the first thing we want to tell you is that there are two different types that you need to know about:
• Living Probate
You need to understand probate of this form is often referred to as a conservatorship, and it is a legal process that determines the outcome in the event you have become incapacitated and simply cannot speak for yourself. This could include illness or mental incapacity.
• Death Probate
This manner of probate will dispose your estate upon your death. Generally, the probate will go through a Will and in the event you die without a will in place, your property will definitely go through probate. If you want to avoid this and ensure that everything comes to a favorable outcome, then it is strongly recommended that you seek out trust attorneys to help you get the job done.
The Effect on Senior Citizens
The American Association of Retired Persons recently released a study titled Probate: Consumer Perspectives and Concerns and in a nutshell, it stated that probate is highly unique for the elderly. According to the results of the study, 90% of all probate property sales came from those aged 60+. To put it quite simply, living probate occurs when you cannot make your own decisions.
Every year, probate related cases cost consumers $2 billion or more, with 75% of that figure resting on attorney’s fees alone. The rest of the fees, combined with appraiser and court costs, could literally leave you with a fraction of the money that your deceased loved one intended to leave you, and that would be absolutely tragic. Throw in the fact that it’s time consuming: most probate cases last for more than a year, and it can be even longer depending upon the circumstance.
How Probate can Affect Your Family
The AARP study dived deep and found that probate almost always occurs once the surviving spouse dies as California couples often jointly own property, but this is not a situation that should be considered exclusive to California. In fact, most people across the nation own their property jointly, and in the absence of a will or trust, once the owner of the property dies, it will need to go through probate before it can pass on to an heir.
Probate can be especially irritating for elderly parents, but it can affect much more than them. It is something that can sneak up on their heirs, and according to a study that was carried out by the American Demographics Magazine, Baby Boomers are failing to save for retirement, and are in fact counting on the inheritance that their parents leave them. Unfortunately, probate can do a great job of affecting the amount of money that you ultimately receive – it can even cause you to receive absolutely nothing if you’re not careful. Attorney fees and court fees can burn through that inheritance quickly, and if you don’t have a backup plan in place, then you might just find yourself out in the cold. This is just another example of why you need to understand probate.
The Conflict Between Trust Attorneys and Probate Attorneys
As it turns out, the conflict between Trust Attorneys and Probate Attorneys is all about money, and the study states that quite a few attorneys build successful practices around understanding probate concepts, using wills to draw in new clients who find themselves facing the twilight of their lives without a plan. You need to know probate so that your plan is effective.
The Study says marketing practice may set a costly trap for consumers. Attorneys lay the groundwork for their probate practice by writing Wills. Some write Wills cheaply as a way to generate other business, prompting the companion to loss leader discounts in retail trade. When the client dies, the same attorney, or other member of the firm, probates the Will at a high fee enough to recover any money lost on the earlier discount. (Probate: Consumer Perspectives and Concerns, Page 51.)
While probate is definitely a money maker, many attorneys would much rather help their customers/clients avoid the hassle of the process which includes inconvenience, public embarrassment, multiple delays, and even publicity. They have begun to raise the question of whether or not probate is even necessary given that it serves to bring undue stress upon those who are already suffering.
Exploring the Necessity of Probate
So here’s the million dollar question, or the elephant in the room, so to speak: is probate even necessary? According to statistics in the state of California, there are only 58 county courts for the 38 million people living in the state, and getting a court date for a probate case can take months. This alone can cause serious problems, but if you add in the other delays, you could spend two years trying to sort out the probate related legalities, and that’s two years before you’ll see any kind of inheritance. So you can see that you need to understand probate now.
A Look at Death Probate
A closer investigation of ‘Death Probate’ shows us that it has these primary functions:
- Assets are Inventoried and given Value
- Validity of Deceased’s Will is Verified
- Family Members have a Chance to Challenge the Will
- Creditors are Given Opportunity to Make Claims against Estate
- Property/Title is Transferred to Heirs as per the Language of the Will. This occurs unless the challenger of the Will wins
Get Around Probate with a Living Trust
Individuals that would like to avoid probate altogether will need to look into alternatives like the Revocable Living Trust. Something to keep in mind is that if the property is valued at more than $150,000, probate will probably always be required whether a will exists or not,. Until you have a thorough understanding of probate you could be at risk. You can however change this by using a Living Trust as it will make probate unnecessary. Your need to understand probate will help you to to put all of your assets into the trust, ensuring that you have absolute control over each and every one of these assets.
You might initially be of the opinion that not owning every single asset in your own name can create problems but it’s not as bad as you think. In fact, this method makes you the owner, manager, and trust beneficiary, and with that being the case, you and your spouse are able to exercise control over your trust and the assets in it. As long as the trust is revocable, you are able to change it, add to it, or revoke it whenever you want. These things, however, are applicable while you are alive and as you already know, we’re more concerned with what happens once you become deceased.
Successor Trustee
The Trust can be taken charge of by your successor trustee following your death, and the successor will execute everything according to what you have written in your will. This simple action will save your heirs and survivors the costs associate with probate, including challenges from angered family members. Compared to probate, setting up a living trust is very inexpensive and cuts down on the inconvenience, which in itself is quite priceless. You can see the clear benefits.
With living trusts you can avoid the indignity of a conservatorship, and this will apply to situations where you become disabled or if your mental capacity has diminished. No one likes to think about such things, but they can certainly happen, and they need to be properly prepared for.
Living trusts are not a new thing – they can be traced back hundreds of years, and as consumers become more and more educated about their clear benefits, they will become even more popular as the years and decades go by. They’re a great way of avoiding hassles, and a great way of keeping attention where it should be during this horrible and traumatic time in your life.
Living Trusts Aren’t Just for the Wealthy
So do all wealthy people utilize trusts? Probably, and they have much more than trusts at their disposal. That’s another story for another day. Now that you know what challenges probate brings, you should probably want to avoid bringing it onto your loved ones – who would want to do that anyway. Even if you have an estate that is valued at lower than $150k, you should use a living trust to avoid the probate issue by understanding probate– this applies regardless of property value.
Let’s be honest, probate brings many potential problems and it’s not something that you want to pass on to your loved ones. In other words, if you know about it, do something about it! As you start searching for a will, do understand that a Living Trust-based estate cost is going to cost you more up front than a bargain basement living trust. As you can see, there is a lot to learn and a call to the right attorney can save you quite a bit in the long run.
Get the Best Attorney
According to the American Academy of Estate Planning Attorneys it is strongly recommended that you begin with an attorney that knows the ‘business’ and is able to concentrate specifically on this area of law. Being a jack of all trades is great in some cases, but when it comes to your property, you want to make sure that you have the best, as this is the most pertinent way to ensure that your legal counsel is dedicated to getting you the outcome that you both want and deserve, your attorney will and will share with you that you need to understand probate and will be able to guide you through estate planning.
The Living Trust
After you have worked out many of the fine details with your estate planning attorney and have discussed the creation of your Living Trust estate plan, you need to take it further because you really need to understand probate to make this effective. There are several steps that you will need to take to ensure that your assets are safe and that they will be distributed to your family in the manner you wish.
- Put all of your assets in your living trust; the trust will only work if the title to your property and accounts have been properly transferred to the trust. If you choose to hold onto the property and keep it in your own name, the trust will do absolutely nothing upon your death.
- Keep the trust up to date! Too many people make the mistake of acquiring new properties and assets without adding them to the trust; don’t be that person. When you understand probate you’ll know that not keeping your trust up to date as your family dynamics change will cost your children dearly.
- Review your trust annually; make sure that it is properly updated at least every 5 years and that it covers your family’s latest situation and goals. If you have a good estate planning attorney, they will remain in touch with you over the years to make sure that your Living Trust sill serves your needs.
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