The Probate Red Tape Process Explained
Ever since my grandfather passed on and my grandmother had to deal with a year and a half of uncertainty, convoluted procedures, and legal bills, I made it my mission to find ways for my clients to avoid the probate red tape. But not only did I want to help my clients, but I also wanted to spread the word about planning techniques to any who would hear it. This excerpt from my book Estate Planning Basics is just one way of spreading that information by discussing what probate is and how it works. Hopefully, by the end, you will want to make things much easier on your loved ones by leaving behind an estate that avoids the probate red tape.
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The children sat around the conference table, extremely upset at what they were being told. Months of court proceedings ahead, thousands upon thousands of dollars in legal fees, and all of his private financial information exposed to the public. Three middle-aged heirs of their father’s estate were looking around for someone to blame, and it was becoming increasingly clear their father and real estate attorney were at fault.
“Your father met with us, and we outlined a plan to do things the right way,” the attorney calmly said. “You obviously found the papers from the seminar we held, and that is how we met your father. I recommended a revocable living trust to handle his estate wishes, stressed the proper titling of accounts and beneficiary designations, and your father even attended a specific seminar on the complexities of the probate process.”
“Here is the letter he wrote me declining my services,” the attorney said, passing the hand-written letter across the table to the oldest son. “He decided to go with a Last Will and Testament through the attorney that handled his house closing. Apparently, his attorney told him probate was no big deal and that he, the other attorney, could do a plan that addressed all of your father’s issues for a few hundred dollars.”
“I don’t understand this,” the daughter said, the frustration of the whole situation getting to her. “My father was told by his attorney that he didn’t need a trust and that probate was not expensive nor was it a big deal. Then we go to him after our father dies and he asks for $20,000 just to start!”
She took a breath, the attorney nodding his head in understanding. “Everything but the IRA is going through probate, two attorneys are telling us it will take about a year, and it’s probably going to cost about $70,000 to administer this thing, and my father, who was a very private person, is going to have all of his finances open to the world,” the daughter said. “Why? Wasn’t a Will supposed to take care of this?”
“Your father fell into one of the biggest traps out there,” the attorney said. “By listening to an attorney who had his own best interests at heart in collecting legal fees later, your father paid less to have a Will and now his estate is paying the price. I’m sorry, but that’s the way it is.”
The younger brother got up from the table and walked out, too frustrated to stay quiet and unwilling to hear anymore.
The older brother sat back into the chair, tapping his pen on the table for a moment, holding back tears and trying to ask the next questions. “If he had done the planning you suggested, would he have avoided the court process?”
“Yes,” the attorney said without hesitation.
“How… how much would the planning have cost?” the brother asked next, his sister starting to cry into her hands.
“A little less than $6,000,” the attorney said
“How much would it have cost to settle the trust?”
“Maybe a few hundred dollars.”
Probate is evil. Fire, brimstone, from the pits of hell, evil.
At least that’s how many people feel when a loved one’s estate is going through the process. Especially when they start writing checks to attorneys for legal fees… or each time the date of death hits a six-month anniversary and the estate is still not settled… or they get yet another round of papers to sign. In all, people see the process as expensive, time-consuming, intrusive, frustrating, and completely worthless.
As an attorney, I can not agree more, and I wish more of my fellow attorneys felt the same way. Unfortunately, many of my colleagues either do not handle much estate planning and so stick to writing Wills, guaranteeing probate for their clients; or worse, they understand what will happen to their clients and they are hoping for large legal fees to handle the paperwork for the probate estate. I discussed the downsides of probate in the Introduction, so there is no need to repeat it here, but…
In the end for the family, probate is still evil.
But the probate process did not start out with that in mind. What it did was provide a framework to make sure that people did not steal from the estate and that the correct beneficiaries received their inheritance. Simple enough. But what it devolved into was a huge labyrinth of paperwork wrapped in an enigma and sealed over with bureaucracy, and it now takes the “expert” in the form of an attorney to decipher the probate code and give the court pieces of paper before it gives up money to the rightful beneficiaries. But, again, what exactly is probate?
In short, probate is the legal court process governed by a State that oversees the transfer of title from a deceased person to the appropriate beneficiary or beneficiaries. Despite the inventories, despite the appraisals, and despite the huge administrative expenses, it is nothing more than an elaborate retitling process. A gigantic, burdensome, pain in the behind, retitling process.
Probate Procedures
The probate court process varies widely and greatly from state to state, so there is no single correct answer to the procedures of probate. However, many of the different states have a few similar characteristics in their procedures. Whatever you do, do not take what is written here as fact for your state or jurisdiction. While there are other components of this book that are fairly universal across 50 states, such as the concepts of revocable living trusts and powers of attorney, you should find books or talk to an attorney about the process in your particular state.