What Every Senior Should Know About Probate
Want to see two groups who make the Republicans and Democrats look like one big, happy
family? Then put into one room those attorneys who believe in probate and those who prefer
their clients manage their affairs with a Revocable Living Trust. You’ll get as contentious an
assembly as you could possibly hope for.
For Seniors, the debate has special meaning, because the vast majority of probate cases revolve
around the affairs of those Americans ages 60 and over. This report explores the reasons for the
debate and offers guidelines to help Seniors steer clear of the fray.
WHAT PROBATE DOES
Just what is probate? First, it’s important to note that it comes in two “flavors.” Living Probate
is a legal process that determines your fate when you cannot—generally because you’ve been
disabled by injury, illness or mental incapacity.
Death probate is the process that disposes of your estate after you die. Having a will virtually
guarantees that your estate will go through probate. But then again, so will dying without any
estate plan at all.
While probate attorneys might be happy with these definitions, trust attorneys would draw your
attention to all the problems that come with probate: red-tape, expense, publicity, delay, loss of
control and in the case of “living” probate, potential for personal humiliation.
THE IMPACT ON SENIORS
In 1989, the American Association of Retired Persons (AARP) decided to look carefully at
probate and its impact on Seniors. As the organization reported in its study Probate: Consumer
Prospectives and Concerns, probate is a special concern for older Americans.
The study found that 90 percent of all probate cases involved the disposition of property owned
by people 60 years of age or older. Because the chances of becoming incapacitated increase
dramatically as we age, living probate is also much more likely to involve seniors.
AARP went on to reveal that consumers nationally spend as much as $2 billion or more each year
on probate-related expenses, with attorneys’ fees alone representing more than $1.5 billion of that
amount. The study noted that attorney’s and executor’s fees could consume as much as 20
percent of small estates, and as much as 10 percent of even uncomplicated estates. And that’s
only the beginning. Add to these fees such expenses as court costs and appraisers’ fees, and your
heirs could end up with a legacy that’s considerably less than you intended.
HOW PROBATE AFFECTS SENIORS’ FAMILIES
AARP found that probate usually comes into play after the surviving spouse of a marriage dies.
Most couples own property jointly. So, at the first death, much if not all of their property
immediately becomes the sole possession of the survivor. When the survivor dies, however, their
property will have to go through probate before it can pass on to their heirs. Since few couples
take into consideration probate costs, many would be saddened to learn how big a dent it will
make in their intended gifts.
Seniors aren’t the only ones who may be blind-sided by probate. Their children and grandchildren
may feel the bite as well. A recent study by American Demographics Magazine revealed that
many Baby Boomers are so financially strapped today that they are deferring an important
financial goal: saving for retirement. Instead they are counting on their inheritance from Mom
and Dad to help pad their meager retirement funds.
So, the higher the probate fees, the less of a legacy they will receive, and the harder it will be for
them to retire.
WHAT THE AARP HAS TO SAY ABOUT PROBATE
Unreasonable expenses aren’t probate’s only drawbacks. There’s also the time involved. AARP’s
study found that probate frequently lasts longer than a year. Having a will seemed to make no
difference in the time required. In fact, it could drag the process out even longer.
Now, add to the expenses and delays of probate these problems: a loss of control over one’s
affairs and the publicity it requires. You can see why AARP declared that:
“Probate as it is generally practiced in the United States is an anachronism…and, to the extent
that the probate system is unreasonable, attorneys’ fees in connection with probate work are
unreasonable.”
(Probate: Consumer Perspectives and Concerns, Page 43)
WHY ATTORNEYS DISAGREE ABOUT PROBATE
AARP’s edict sums up the reason for so much rancor between pro-probate and pro-trust
attorneys. It’s a matter of money, and loss of it. The AARP study noted that attorneys often
build lucrative practices focused solely on probate. Many use cheap wills as a “loss leader.”
According to AARP:
“This 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 comparison to loss leader discounts in the retail trade. When the client
later dies, the same attorney, or another member of the firm, probates the will at a fee high
enough to recover any money lost on the earlier discount.”
But not all attorneys have been happy with the status quo and escalating consumer dissatisfaction
with probate. A growing number would rather spare their clients the expense, delay, publicity,
What Every Senior Should Know About Probate
inconvenience and potential for public humiliation that can be such an integral part of the
probate process.
IS PROBATE EVEN NECESSARY?
“Death Probate” has these primary functions:
• It verifies the validity of your will.
• It inventories and establishes the value of your significant assets.
• It gives disgruntled family members a forum for challenging your will.
• Lastly, when all these steps have been completed, it transfers the title of your property
to your heirs, as you’ve instructed in your will.
Do you really need probate to accomplish these tasks? AARP says no. Instead, it recommends
alternatives such as the Revocable Living Trust.
HOW TO AVOID PROBATE WITH A LIVING TRUST?
Whether you die with a will or without one, probate will be required if you owned any property in
your own name.
A Living Trust makes probate unnecessary by changing the way you own your property.
Although you still have absolute control over all your assets, just as if you owned them directly,
you do not own property in your own name. Instead, your Living Trust owns your property.
And you own your Living Trust.
At first blush, that can sound like a scary proposition. But it isn’t, because you are the Trust
Maker, the Trust Owner and the Trust Beneficiary. So you and you alone control your Trust and
the assets it owns. You can buy, sell, trade, derive income from, mortgage and give away your
Trust assets, just as before. You can change your Trust, add to it, or even revoke it any time you
want. Bottom line: the fact that your Trust owns your property has little if any impact on the way
you live and conduct business each day.
But what a difference the Trust makes when you die. Then, the person you’ve chosen to take
charge of your Trust, your Successor Trustee, steps in and follows your directions for the
disposition of your estate. Because you owned no property in your own name, there’s no need
for probate. So there’s no publicity and, compared to probate, very little expense, delay or
inconvenience for your family.
As well as avoiding probate, a Living Trust can also help minimize estate taxes, which are the
highest in the land. Estate taxes start at 41 percent and rise to a maximum of 55 percent.
Living Trusts are also indispensable for avoiding the indignity of living probate ⎯ the court
proceedings that determine who will oversee your affairs in the event of your disability. A Living
Trust helps you ensure that your physical and financial needs are handled as you would want
them to be.
The Living Trust isn’t exactly a new idea. Its origins date back hundreds of years. More
importantly for Americans, the concept has been used in the U.S. since 1765 when Patrick Henry
drafted a trust for Robert Morris, governor of the Colony of Virginia. During this century, its
many proponents have included John F. Kennedy, William Waldorf Astor, John D. Rockefeller,
H.L. Hunt, Bing Crosby and Frank Sinatra. As consumers become better educated about the
pitfalls of probate, all signs point to Living Trusts becoming even more popular in the years
ahead.
JUST FOR THE WEALTHY?
Now that you know all the problems that probate entails, it’s probably the last thing you’d want
to bequeath to your loved ones. But is it a strategy worth pursuing only if you’re a Rockefeller or
Vanderbilt?
Absolutely not. Even if your estate is valued at no more than $50,000, you should probably have
a Living Trust to avoid death probate. And regardless of how much your estate is worth, you
should definitely have a Living Trust if you want to avoid living probate.
Who should you turn to for help with your Living Trust? We recommend that you start with an
attorney who concentrates in this area of the law. That’s the best way to ensure that your legal
professional has invested the time and energy to provide you with the most current estate
planning techniques.
Remember that wills and probate are also estate planning tools. So make sure your attorney
focuses on the Living Trust, rather than a will.
GETTING THE MOST FROM YOUR LIVING TRUST
Once you’ve worked with your attorney to draw up your Living Trust, don’t stop there. Taking
advantage of everything this powerful estate planning tool has to offer requires these final steps:
• Make sure you fund your Living Trust. Remember that it only works if the title to your
property has been transferred to the trust. If you keep your property in your own name,
you’ve defeated its purpose. These days, most financial advisors are experienced in
funding Living Trusts, so be sure to turn to your advisor for help if you need it.
• Keep your Living Trust current. As you acquire new property, be sure that you transfer
title of these assets to your Living Trust.
• Ideally, a Living Trust is a living document, and a plan that will serve you for many years to come. That means, however, that you’ve got to take the time to have it updated as your
family’s situation, your goals, and your needs change. A good estate planning attorney will
stay in touch with you over the years to ensure your Living Trust continues to serve you well.
PENNY WISE, POUND FOOLISH
Yes, it is true that a Living Trust will cost you more up front than a “discount” will. But in estate
plans, as in all other areas, you get what you pay for. The bargain you buy today might just cost
you or your heirs a fortune⎯your fortune⎯down the road.
Reprinted from www.MorrisTrust.com to see original, click here.
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