“I only need a simple will.”
We get it. So let’s simplify.
Often, clients come into The Binder Firm nervous about getting lost in all the legal red tape. They just want to put something down on paper so their kids don’t face a lengthy legal battle.
By “simple,” clients often believe their finances are ordinary and unexceptional, and that, upon their death, their assets would be clear-cut, easy and quick to distribute, and they would like the simplest, most basic estate planning documents.
Here’s the hard truth: Narrowing down the scale of your estate to a couple of accounts deemed most important is not going to be the magic solution to the fastest and cheapest legal services. Simple, will-based plans may be appropriate for an individual with no children and few or uncomplicated assets, but “simple” plans are often inadequate for other individuals and result in lengthy, and expensive, probate and estate administrations.
Why is simplicity the goal for so many clients? Because unless you’re in this specific legal field, it’s very hard to really know what would legally transpire upon death with simple documents that don’t fit their particular family, estate, and goals. Asyour attorney, it is our responsibility to explain what actually happens at death, beginning with probate and probate alternatives and ending with an analysis of your unique situation. After being sufficiently educated, clients often discover that simplicity would defeat their goals and be a disservice to their family and estate.
What is Probate (and When Is It Necessary)?
The simple version: Probate is the legal process by which your estate is defined and distributed upon your death—according to varying laws by state.
The expanded version: Probate, also called estate administration, is the judicial process by which a decedent’s assets (his or her estate) are distributed to his or her heirs or other devisees. Probate codes and procedures historically differed significantly from state-to-state. To encourage uniformity in probate codes and procedure in 1969, the National Conference of Commissioners on Uniform State Laws, also known as the Uniform Law Commission, with the Real Property, Probate and Trust Law Section of the American Bar Association, created the Uniform Probate Code (UPC). To date, 18 states have fully adopted the UPC, and all but a few states have adopted the UPC at least in part. Despite this attempt for uniformity, probate is undeniably state specific.
In both UPC and non-UPC states, there are two preliminary inquiries practitioners must make:
(a) whether decedent had a valid will, and
(b) whether probate is necessary.
If a decedent had a will, he or she is deemed to have died “testate,” and the will governs the distribution of his or her assets. If a decedent did not have a will, he or she died “intestate,” and the decedent’s state’s laws of intestacy will determinewho will get his or her assets.
It’s getting complicated. Are there alternatives?
Yes, there are UPC and non-UPC state alternative proceeding options. Generally, probate alternatives for small to midsize estates fall into two categories: summary or affidavit. Learn more about the breakdowns of how probate operates HERE.
Should Probate be Avoided?
Aside from cases where probate and court involvement are required or even desired, such as estates where contests or controversies between parties exist, should probate otherwise be avoided? There are both advantages and disadvantages to probate. One advantage is that probate ensures that the administration of an estate, including the Personal Representative’s actions, are monitored—in varying degrees—by a court. Another advantage is that creditors, both known and unknown, are given a definitive cut-off date for bringing claims against an estate, and if they fail to do so, they are forever time-barred.
While probate and estate administration procedures in some states have become streamlined, there can be many disadvantages to probate, including the time and expenses involved. Even in unsupervised administration, estates are rarely “closed” in less than a year. Personal Representatives spend hours of their own time working through the many requirements of administration. Many cannot do so on their own and hire an attorney to assist, at the estate’s expense. Attorney fees, court costs, and other administrative expenses add up and reduce the size of the estate itself. Privacy concerns pose yet another disadvantage to probate, as the decedent’s will, and other details about the decedent, his or her estate, and the beneficiaries become a matter of public record.
How to Avoid Probate
Wills or Revocable Living Trusts
In simplest terms, wills may require probate, whereas revocable living trust can avoid the probate process. Wills can be robust documents containing tax saving and asset protection strategies. However, wills provide instructions for distributing assets at death only. Wills—absent the availability of a summary/small estate affidavit—require probate.
Revocable living trusts, on the other hand, become effective immediately upon creation and are vehicles for the management of assets during his or her lifetime, including during periods of incapacity and at death. Revocable living trusts also make it easier to distribute assets without court involvement at death. A trust can avoid probate when it owns all of the decedent’s assets or is otherwise the recipient of the assets upon his or her death using other probate-avoidance tools such as those discussed below. And as the name suggests, it can be altered as needed in the meantime.
Summary
When a client or potential client claims they need a simple estate plan, we at The Binder firm work to educate you on what simplicity looks like at death. This discussion should begin with an explanation of what actually happens, legally, when someone dies with a simple will-based plan. This education will include an explanation of probate and probate alternatives and end with an analysis of your unique goals, family and estate. Through this education we hope to help you understand that simplicity isn’t so black and white, and that what appears to cost less today to set up may cost more to administer. But rest assured we are here to navigate the pros and cons until you feel confident in whatever decision is best for your situation.
