Several weeks ago, I was called by a young man who was responding to our correspondence and requesting our services. He was not the owner of the property, rather a son and nephew of the two sons who had inherited the property from their mother (his grandmother) who had passed away earlier this year. There were family problems that are better left untold, but suffice it to say the two brothers were not in agreement as to what or how to dispose of the property, and their disharmony was exacerbated by the fact that the property was now in foreclosure. Their battling kept either from making the mortgage payments and taking the necessary steps to initiate the probate proceedings. The young man who responded to our correspondence was trying his best to get help such that his grandmother’s legacy was not simply devoured in the ambiguity of the foreclosure process. The grandmother did not have a Living Trust and as such all of the estate assets were subject to probate. The nephew was clear to state that he was not named in the will, and as such did not have a dog in this fight, but he was hoping to have a professional intercede and make his father and his uncle see what had to be done, and quickly, lest the family home would be lost to foreclosure.

The mother died testate, that is to say she had a will. In the will she named one son as executor of the estate and the other as a successor executor should the first son not be eligible or desire to administer the estate. A quick on-line review of the named executor showed that he was a convicted felon, and as such not eligible by State Statute to serve as executor. The second son would be required to step up to the plate, but because of his on-going feud with his brother, he elected to pass on the position and in so doing, threw the estate into jeopardy wherein the State could and would make claim to the estate assets if permitted so by a judge.

This whole mess could have been averted had the owner simply established a Living Trust while she was living wherein she could direct to whom her assets should be given. Regardless of the first son’s felony record, he would have been eligible to be a Successor Trustee and beneficiary of the estate, and see to the proper administration of the estate assets. Instead, at best, this property will only be saved if the heirs initiate the probate process with an attorney. Hopefully the attorney will be successful at moving the probate court to temporarily suspend the foreclosure process until the estate is probated and arrangements can be made to satisfy or re-finance the grandmother’s mortgage. Then, the heirs can legitimately convey the property and convert the estate asset into cash.

Let’s briefly discuss what probate is and then talk about the best way to avoid probate for your assets:

WHAT IS PROBATE?
Probate is the legal process by which property in an estate is transferred to the heirs and beneficiaries of a deceased person (the decedent). Heirs are persons who are entitled to receive a decedent’s property if the decedent died without a will. Beneficiaries are persons named in a decedent’s will to receive property.

The probate process begins by presenting to the judge the will of the decedent or, if there is no will, by presenting to the judge a list of the decedent’s property and a list of people to whom it is proposed that the property be given.

Not all property owned by the decedent at the time of his or her death has to go through the probate process. Only probate property (also called probatable assets) is subject to the probate process. Probate property includes property owned in the individual name of the decedent alone or in the individual name of the decedent and another person without survivorship rights. Common examples of probate property include:

If husband and wife owned property jointly as tenants by the entireties, or if two people owned property as joint tenants with rights of survivorship, the property passes automatically to the surviving owner and does not need to go through the probate process.

THE ROLL OF A WILL IN THE PROBATE PROCESS:
A will allows you to decide who gets your property after your death. You can give specific gifts of personal items to certain persons and decide which of your friends or relatives deserve a greater share of your estate.

A will allows you to decide who will be the executor of your estate. The executor can also be granted broad powers, in addition to the powers given to executors by law, to handle estate matters. A will allows you to choose a guardian for your minor children.

ADVANTAGES & DISADVANTAGES OF PROBATE:
There are many disadvantages of the probate process. When you read the following disadvantages, you will quickly see there is good reason to take steps now to reduce your estate exposure to probate.

First, the cost of probate can be quite significant. These costs include filing fees, appraiser fees, executor fees and attorney fees. Of all of thee fees, naturally the attorney charges the most.

The probate process is very time consuming and can cause long delays in transferring assets to your beneficiaries. Generally, the minimum period required to complete the probate process is 4 months. It is not unusual for the process to take as long as 18 months. I know of several that have taken as much as two to five years. During this time, money is tied up and household expenses, other bare necessities and college tuitions can be interrupted until the probate is completed.

Once your will is admitted to probate it becomes a matter of public record. While some states seal the inventory of estate assets, generally the identity of the executor and beneficiaries and the inventory of estate assets, including their value, are available for inspection by anyone who asks.

And finally, a will can be subject to challenge by disgruntled heirs. Such controversy can undermine the power of the executor over the distribution of the estate assets and the implementation of your wishes.

There are a few advantages that merit mentioning:

First, only a will can name a guardian to take care of your minor children. The probate court will almost always honor a designation of guardian in a will.

Second, after the will is admitted to probate, the executor will be required to give notice to any creditor you may have at the time of your death. As soon as the notice is given, the clock starts ticking and the creditors only have a limited period of time to formally file a claim against the estate.

Finally, if probate alternatives are used, including the living trust, there may be some assets that do not get transferred to the trust or that are not covered by a beneficiary designation.

So what are the alternatives to probate?  For the purpose of this newsletter, I am going to only address The Living Trust. I find it to be the cleanest, most concise way of getting and keeping your proverbial house in order.

WHAT IS A LIVING TRUST?
For hundreds of years, trusts have been the most popular way to avoid probate, especially for large estate.

A Trust is a legal entity that comes into existence when an individual signs a legal document that contains certain provisions. A trust can be an inter vivos trust (meaning it is created during one’s lifetime) or a testamentary trust (meaning it does not start until one’s death). It can be revocable (meaning it can be changed at any time prior to death) or irrevocable (meaning it cannot ordinarily be changed).

All states recognize living trusts as substitutes for wills. As you move from state to state, the trust is valid in all states. The living trust is a legal entity that can hold, own and distribute assets to trust beneficiaries. It is created by a legal document and funded when legal title o assets is transferred to the Trustee.

ADVANTAGES OF A LIVING TRUST:
Living Trusts have several advantages that wills do not:

DISADVANTAGES OF A LIVING TRUST:
While living trusts have many advantages over a will, there are some drawbacks:

Our package comes in a handsome leather binder, complete with instructions for the Settlor as well as instructions for the executor of your estate. All documents come in PDF format on a compact disc.