Unless you are gluten for punishment, do everything you can to avoid probate. Jim’s parents didn’t and it cost him over $200,000. Before I tell you Jim’s story, let me give you some background.
What Is Probate?
When you die, there needs to be a mechanism to pass whatever you own (your estate) to someone else. If you don’t set things up well, that “mechanism” will be probate.
Probate is when the court decides what to do with your assets once you die. The bad news is that probate usually takes a very long time and is very expensive. Your estate pays all the costs. But the good news is the lawyers make a ton of money and get to drive fancy cars and vacation in Paris because of it. 🙁
Back to Jim’s story.
Jim’s father was on his deathbed and his mother wasn’t far behind. Their home and investments were worth just about $700,000 – so they didn’t have to worry about estate taxes. But Jim, an only child, still had to worry about probate – the “mechanism” to transfer the assets. Remember?
Estate tax is one issue, but probate is quite another.
Enter the California Estate Planning Lawyer
Jim’s parents did not have a living trust, but they did have a will. They didn’t even know what a living trust was.
Jim consulted his attorney before his parents died – a smart move. But the attorney seemed more concerned about his own estate rather than Jim’s parents’ assets. He advised that Jim pay him a retainer of $30,000 to handle the estate. He didn’t say anything about taking steps to avoid probate. Unbelievable.
It turns out that this attorney spent most of his time (and earns most of his money) by arguing probate cases. This is a very bad sign. It means that the “mechanism” this attorney uses never works. Remember, the whole idea of estate planning is to avoid probate. It’s like seeing a doctor who spends most of her time defending herself from malpractice suits. Also not a good sign. Right?
Had Jim asked the attorney how often he ends up in probate court he never would have hired him. He didn’t ask that question so he spent the $30,000 retainer plus another $170,000 in court and legal fees to settle the estate. In other words he forked over 30% of the estate to the courts and lawyers!
And you know what? It could have been much worse. Elvis Presley died without having a trust either. His estate shrank from $10 million to $3 million. (Forget about stepping on my blue suede shoes; just get me out of probate!)
What would a good attorney have done?
I’m not an attorney but I think a good lawyer would have at least discussed setting up a living trust or other alternatives to probate. You see, a living trust provides the “mechanism” to move assets from the deceased to the survivors – just like probate. But it costs a small fraction of what probate costs – usually under $3,500 for a super deluxe model. Also, it takes a whole lot less time to complete. While a probate could take years to complete, a trust could disperse assets in a matter of days or weeks. And for those so inclined, you can create your living trust using a legal service rather than using a lawyer. That saves a ton of dough friend.
What is the downside of using a trust? Well, as I said, I’m not an attorney so I can’t give you legal advice, but I can’t think of any downside. Oh…wait…there is one negative consequence of using a trust. It slashes legal fees, so if you’re a probate lawyer it’s really bad news. Pass the Kleenex. (Just remember if you do set a trust, make sure you actually put your assets into the trust correctly.)
Have you had any experiences with probate? How did you find your attorney? How did it work out?
Please remember that I am not providing legal advice. You should consult a good attorney to discuss the pros and cons of trusts and wills before making a decision.