Why Would I Want to Go Through Probate

I had two clients come through our offices last week in which both plans are designed and intended to go through probate after death. For most of our clients, avoiding the time, cost and lack of privacy of probate court proceedings after death is an important goal of their estate plan. However, with estate plans, one size does not fit all. There may be situations in which you may want your loved ones to go through probate.

Both of these clients last week had:

  • Estates under $200,000, including the house.
  • Lots of kids, one or more of whom were greedy and already treating the parent’s assets as their own.
  • Wanted only one child at a time in charge both during their incapacity and after their death.
  • Did not want the cost and maintenance of a trust during lifetime.
  • Wanted to leave everything to the kid’s equally.
  • Did not want to use beneficiary designations or joint ownership because after death, one or more of the kids would not likely contribute their share of any expenses nor be agreeable when selling the house.

The plans would be simple to maintain and stay out of probate during lifetime. After death, the designated child would be appointed personal representative by the court, could gather up and sell all of the assets without needing the agreement of their siblings, pay all of the bills and expenses, and then distribute what’s left to the kids equally.

In both these situations, it made sense to remove all beneficiary designations and joint owners, and send all the assets through probate after death. If they wanted a personal assistant to help pay bills during lifetime, they had a financial power of attorney to take care of that.

Should you have a will or a trust? This is a question that I and my law partner Buzz Suuppi get all the time. We sometimes get clients coming in to our offices saying that all they want is a will or they need a trust. Until we sit down with them and find out what is important to them, and what goals and objectives they want to accomplish with their plan, we cannot recommend or draft a plan.

Every client is different and every plan is different. However, there are some basic documents that all plans should have. If you are over the age of 18 and not mentally incapacitated, at a minimum, you should have a will-based estate plan, which includes a financial power of attorney, a health care power of attorney and a will.

In most instances, your financial power of attorney will avoid the necessity of a court appointed conservator during your mental disability. Similarly, your health care power of attorney will usually avoid the necessity of a court appointed guardian in the event of your mental disability.

With a will-based estate plan, your will is the primary operative document for the transfer of your assets to loved ones after your death through the probate court process, sometimes coupled with non-probate beneficiary designations and joint ownership.

With a fully-funded trust-based estate plan, you add a trust to a will-based plan. Your trust is the primary operative document for the management of your assets during your lifetime and the transfer of your assets to loved ones after your death, generally without any court involvement. The will in a trust-based estate plan is a pour-over will, which is used as a back-up to pour-over any assets into your trust that were not funded into your trust during your lifetime.

As we have previously discussed in this column, there is no minimum dollar amount of assets necessary for you to own before a trust is used. You do not need $1 million in assets, or a taxable estate ($11.2 million in 2018) before a trust makes sense for you. We’ve had clients with a net-worth below $100,000 for whom we have prepared fully-funded trust-based estate plans, as well as clients with a net worth in excess of $1 million for whom we have prepared will-based estate plans.

Here are the three most common reasons that some of our clients choose a will based estate plan instead of a trust-based estate plan:

  • Will-based plans are simpler than trust-based plans to set up and maintain during your lifetime.
  • Because they are simpler, will-based plans are more economical to set up initially than trust-based plans.
  • You may try to avoid probate by using joint ownership and beneficiary designations, but this can backfire and not work as intended because the joint owner or beneficiary got mad, got greedy, got sick, got sued, got divorced, was a minor or died in the wrong order.

Most of our clients who have at least $100,000 in net investable assets other than their home choose a fully-funded trust-based estate plan. These are the most common reasons for their choice :

  • Keeping matters private within the family.
  • Avoid probate.
  • Keeps matters simpler after death.
  • A trust-based plan death administration is generally simpler and less costly to manage than a probate court administration.
  • Keep overall costs down, both during lifetime and after death.
  • Protect inheritance from beneficiaries with poor money management skills.
  • Protect inheritance from beneficiaries’ creditors.
  • Protect inheritance from beneficiaries’ divorces and remarriages.
  • Protect inheritance from alcoholic or drug/gambling addicted beneficiaries.
  • Protect family cottage, farm or waterfront property.
  • Pay for beneficiaries’ college or other studies.
  • Provide for special needs beneficiaries, without disqualifying them from their governmental benefits, such as SSI or Medicaid.
  • Provide for your pets.
  • Provide an incentive for lazy beneficiaries. They only get trust distributions if they work. If they don’t work, they get nothing.

With proper planning, you stay in control while you are alive and well; provide for you and your loved ones during your mental disability; and after you are gone, give what you have to whom you want when you want the way you want; all at the lowest overall cost to you and your loved ones.

By Matthew M. Wallace, CPA, JD

Published edited May 6, 2018 in The Times Herald newspaper Port Huron, Michigan as: Why would I want to go through probate?

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