You're at a party or family gathering and one of your peers or loved ones tells you that they just met with an estate planning attorney to set up an estate plan to avoid probate. You nod approvingly and say something to the effect of, "That's great! I've been meaning to set something up for my family. Can I have their contact information?" You receive the attorney's phone number, but you are hesitant to call because you don't know if you need their assistance. You don't know what probate actually is and you don't know whether or not you should avoid it.
So, what is probate? Probate is a legal process by which a decedent's assets are inventoried, collected, subjected to payment of claims made by the decedent's creditors, and distributed to the decedent's beneficiaries under his/her will (or if they didn't have a will, i.e., they died intestate) the law of intestate succession.
Is probate undesirable? Not necessarily. Probate can be desirable for a number of reasons. For one, probate is a judicially supervised proceeding. If a dispute arises (e.g., the will is contested), having a judge supervise the proceeding can lead to a speedy resolution. This could avoid an heir or beneficiary needing to open a separate proceeding to have their issue resolved. Second, with some exceptions, creditors may only file their claims against the estate within four months of the "letter being issued" (i.e., the personal representative being given authority to administer the estate). If a creditor fails to file their claim within that period of time, their claim is generally barred.
While there are some advantages to probate, there are more disadvantages. For one, probate can be quite costly. The personal representative (i.e., the person responsible for administering the decedent's estate) is entitled to compensation. Their fees are set by statute and the amount is a percentage of the estate. Generally, the personal representative retains an attorney to assist with the administration, and that attorney is entitled to the same compensation as the personal representative. Second, probate is a public proceeding. While not all counties make court filings accessible online, any interested person may request copies of court filing either by mail or in person for a small fee. Plus, there are now companies that scour court filings to determine what assets the decedent had (e.g., real estate) and will attempt to solicit the personal representative, heirs or beneficiaries. Lastly, probate, unfortunately, is not a quick process. California law requires that each probate proceedings be open for a certain period of time resulting in a delay in which the decedent's assets are distributed to his or her intended beneficiaries.
If probate sounds like something you wish to avoid, you should speak with an estate planning attorney to determine if one or more of the following probate avoidance techniques is right for you:
- Revocable and Irrevocable Inter Vivos Trusts;
- Beneficiary designations on certain assets (e.g., certain retirement plans and life insurance policies);
- Joint tenancies (and community property with right of survivorship);
- Multi-party accounts (e.g., joint bank accounts); and
- Lifetime gifting.