How to Avoid Probate for Everyone: Protecting Your Estate for Your Loved Ones

Copyright © 2020 by Ronald Farrington Sharp

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Library of Congress Cataloging-in-Publication Data

Names: Sharp, Ronald Farrington, author.

Title: How to avoid probate for everyone: protecting your estate for your loved ones / Ronald Farrington Sharp.

Description: New York: Allworth Press, 2020. | Includes index.

Identifiers: LCCN 2019050256 (print) | LCCN 2019050257 (ebook) | ISBN 9781621537304 (trade paperback) | ISBN 9781621537311 (epub)

Subjects: LCSH: Probate law and practice—United States—Popular works. | Estate planning—United States—Popular works. | Trusts and trustees—United States—Popular works. | LCGFT: Legal forms.

Classification: LCC KF765 .S53 2020 (print) | LCC KF765 (ebook) | DDC 346.7305/2--dc23

LC record available at https://lccn.loc.gov/2019050256

LC ebook record available at https://lccn.loc.gov/2019050257

Print ISBN: 978-1-62153-730-4

eBook ISBN: 978-1-62153-731-1

Printed in the United States of America

Death is not the end. There remains the litigation over the estate.

—Ambrose Bierce, Epigrams of a Cynic

Author’s Note

This book discusses, but is not limited to, the use of many non-trust ways of avoiding probate as well as trusts as a probate avoidance method. For more detailed information on trust creation and settlement, the book Living Trusts for Everyone is another great resource.

Disclaimer: Nothing in this book is intended as legal or tax advice but merely discusses issues of interest to those seeking information about various estate planning methods. Laws and procedures vary from state to state and change frequently. For information regarding your particular situation or for legal advice, you should consult a qualified attorney in your state.

Contents

Introduction

Chapter One:

The Probate Process

Chapter Two:

Avoiding Probate without Using Trusts

Chapter Three:

Using Trusts as a Probate-Avoiding Tool

Chapter Four:

Six Situations When a Trust Is Absolutely Necessary

Chapter Five:

Using Powers of Attorney to Avoid Court-Ordered Guardians and Conservators

Chapter Six:

Selecting and Dealing with Attorneys

Chapter Seven:

Funding the Trust

Chapter Eight:

Myths and Misconceptions about Estates and Probate

Appendix A:

Sample Intestacy Laws

Appendix B:

Sample Medical Power of Attorney and Advance Directive

Appendix C:

Sample Durable Springing Power of Attorney

Appendix D:

Sample Information Form to Take to Your Attorney to Start the Trust Process

Appendix E:

Sample Simple Trust

Appendix F:

Sample Pour-Over Will

Appendix G:

Sample Assignment of Assets to Trust

Glossary of Terms

Index

Introduction

Here’s what I think about using the probate court to settle a decedent’s estate: Probate is an unnecessary evil that can be made necessary because of improper planning. While probate has its uses, it is like an antidote for a snake bite—indispensable if you need it, but something you hope you will never have to use. Better you should avoid snakes—and probate. If you don’t mind spending lots of money to pass on your assets to your heirs, and if you like the idea of their waiting for up to two years to inherit—during which time they get to meet with attorneys multiple times and attend court hearings—then probate is for you.

That said, let’s talk about what we mean by probate. Probate is a broad term that encompasses all of the functions of a probate court, including settling a decedent’s estate as well as myriad other functions involving estates, the disabled, and children. While it is important to avoid the costs and time delays of probate court, we sometimes do need to use the judicial functions and power of the courts to further the wishes of a decedent. It’s useful as a backup when we need to protect the interests of a person’s heirs. So it’s not totally and completely bad.

This book identifies and describes methods of avoiding probate of estates. Books on probate avoidance typically recommend the use of revocable trusts as a will alternative and stop there. Sometimes they even supply a fill-in-the-blank form to make a do-it-yourself trust. However, trusts are not the only way to avoid probate estate administration, and sometimes they are not the best way. The goal of any estate plan should be to ensure that the assets remaining at death are distributed or managed according to the wishes of the deceased in the least complicated, least expensive, and least time-consuming manner. While trusts are good, there are many other ways to avoid probate that do not rely on either a will or a trust. The makeup of a person’s assets, their intentions, and their family situation will determine which methods are preferable. These alternate methods and how they work are detailed in the following pages.

The probate court also can interfere in your affairs in non-estate settlement areas. For example, there are methods of avoiding probate court involvement in minor or adult conservatorships. Probate courts can take administrative control of the assets of minor children and mentally disabled adults to protect their money from loss or misuse, but this service comes with several burdens. There are significant costs to these estates for the fees of a guardian-ad-litem and court-appointed conservators. The court has the discretion to and may well appoint someone other than your first choice to serve in these roles. If a family member or friend is appointed, they will be forced to file reports and paperwork and attend regular court hearings, which might require them to take time off work and/or pay an attorney. Proper planning can keep the court out of your family affairs.

The judicial functions of a court can be utilized if needed to help collect assets of the estate or to enforce the terms of estate administration without subjecting the entire estate to court oversight.

The appendices include sample documents so that you can see what they typically look like. I do not recommend that you copy these for your own use. They may or may not be appropriate for your situation or in your home state. This is not a textbook or treatise on the law, and laws vary among the states, so do not rely on this as legal or tax advice for your particular situation. You should consult a lawyer in your individual jurisdiction to effectuate any legal plan that you need.

I think you will find the information herein helpful.

—Ronald Farrington Sharp

CHAPTER ONE

The Probate Process

What exactly is probate? Historically, the word probate is the process of filing a decedent’s will with a court and proving it. The proof required is, first, that it is the most recent true will of the person signing it, and second, that the person was of sound mind and not under undue influence when it was signed. The proof traditionally required was the testimony of two witnesses who saw it being signed. But wills can be found valid even without witnesses if, for example, it is written in the handwriting of the will maker (holographic will), but proving such a will most often requires a court hearing and the testimony of interested parties.

Nowadays a will can be self-proving without a hearing or witness testimony by following the local statute, which usually requires that the will also be notarized. Then the probate process begins. Probate procedures are statutory: they are codified into written law in each state. The particular court may be called Probate Court, but might also have another name, such as Superior Court or Circuit Court. The point is that the state court system is in charge of the probate process, which follows a step-by-step procedure as laid out in the written laws. In this book, the applicable court will be referred to as the probate court.

This kind of thing has happened in my office many times: A client comes to me complaining that the real estate people won’t let her sell her deceased father’s house even though she is the only child, Mom is dead, and the will leaves everything to her. She also can’t access his bank accounts even after giving a copy of the will to the bank manager. Logically and morally, she should be right. But the problem is that the real estate companies and banks want to protect themselves and be sure that the will is valid, that it has not been revoked, and that there is some court authority on which they can hang their hats before allowing the daughter access to the assets. Can’t blame them for that. In this situation, some sort of probate is necessary so that there is a court order signed by a judge that confirms that she is entitled to the house and accounts.

A person in possession of a will is required to turn it over to the court upon the death of its maker. The court then appoints a named personal representative or an appointed administrator to shepherd the will through the process of gathering all assets together, paying all debts and expenses, and distributing the remainder to the heirs named in the will according to its instructions.

This should be simple, but it is not. And it can be incredibly expensive and time-consuming.

But what if there is no will? According to LexisNexis, 55 percent of people die without either a will or a trust. Sometimes they assume everything will somehow magically work out the way they expect. Most people, I think, have in the back of their minds that they should have a will or some other kind of estate plan, but never get around to doing it. They may expect that probate will be involved and that there is nothing they need to do to expedite things. Isn’t it really a problem for the heirs?

If you don’t decide on an estate plan for yourself, your state laws have already made one for you. Not having an estate plan is somewhat like not voting. The law assumes that you must not care what happens and are willing to accept whatever everyone else decides; otherwise you would have done something about it.

The laws determining who gets what when a person dies without a will are called the laws of descent and distribution (or, the laws of intestacy). These state laws lay out the respective shares of the heirs of the deceased and depend upon whether the person was married or had children, or both. They vary from state to state, but the laws are similar. The text of the law in Appendix A is a typical example from Michigan, but a simple internet search for descent and distribution with the addition of your state’s name will give you specifics for your state.

Making your own plan to leave your assets at your death, by will or otherwise, can also avoid unintended inheritances. Suppose you have no children and your spouse dies, leaving business assets or accounts that were in her name alone. According to the rules in Michigan you would get The first $150,000.00, plus 3/4 of any balance of the intestate estate, if no descendant of the decedent survives the decedent, but a parent of the decedent survives the decedent. Do you really want to share your spouse’s separate estate with your mother-in-law? Most of us assume our spouse would be entitled to our assets if we die without a will, but that is just not always true.

Another typical situation: Your spouse has children, but none of them are your children, and then your spouse dies. In this case you would get the first $100,000 of his assets and one-half of the rest. This can create severe hardship on a surviving spouse who had been counting on all the assets for his or her support and maintenance for life.

Now, if you and your spouse jointly own everything and are each other’s beneficiaries, it is true there would be no probate at the death of one of you because there are no separately owned assets remaining at the death of the first spouse. But what if you each have separate assets, like business or partnership interests or private bank or investment accounts? In that case the intestacy laws apply. And at the death of the survivor, probate would likely be inevitable, and your heirs will not only get just a partial share but will be shouldering the costs of probate as well.

Try not to die intestate unless you agree with the state intestacy rules. Making sure your intentions are followed as to the distribution of your estate at death is important, but not forcing your spouse or children to go through the expensive and time-consuming probate process is equally important.

Unmarried couples in particular must have a will or a probate-avoiding estate plan. Without a recognized legal marriage, the couple does not have spousal rights as set out in the statutes. This can lead to disinheriting your companion. A will, trust, or other plan can avoid this unfortunate situation. I have seen a surviving unmarried partner be forced out of a house he had lived in for thirty years by the children of the first partner to die, since the house had been owned only in the deceased partner’s name. He died and the house now belongs to the deceased partner’s children. Planning is everything.

An important point is that in nearly all states it is impossible to totally disinherit a spouse by use of a will. The surviving spouse typically has a right to either take what was left to him or her in the will or take what the state statutes would allow instead: a forced share of the total probate estate. There are also rules permitting a spousal allowance to be paid prior to the closing of probate. Interestingly, in many states the deceased can disinherit a spouse through a living trust, but not through a will. So, there’s another reason to avoid probate if you are not inclined to take care of