Frequently Asked Questions
What Is Probate?
Probate is the court-supervised process by which your estate is administered. The court assumes control over your assets; makes sure that your bills are paid, will contests are resolved, estate and income taxes are paid, and that the property is then distributed according to the instructions in your will, or according to law if you have no will.
What Is a Conservatorship?
Conservatorship is the court-supervised administration of your estate during any period that you are unable to do so yourself because of incapacity. The probate court, although authorizing the conservator to handle the day-to-day management of your estate, assumes control over your assets and closely monitors what is done with those assets.
Both probate and conservatorship result in an invasion of your and your family's privacy. Your will (in the case of probate), your mental and physical health (in the case of conservatorship), your assets and debts (in both cases) become a matter of public record.
Both probate and conservatorship are burdensome and time-consuming. Both are expensive. In the case of probate, the attorney's fees and the executor's fees are set by law and are a percentage of the gross value of the probate estate.
Is probate expensive?
Probate costs generally run about 4-5% of the decedent’s gross estate, and can easily run higher. The decedents debts are not taken into consideration in this cost as it is based on the “gross” value of the decedent’s assets. With the real estate market the way it is, many clients have estates worth more than their equity interest which causes new interesting twists to the process.
Is a conservatorship expensive?
Unlike a probate, an attorney and conservator are both compensated based upon the work they perform at their normal hourly rates. As one can imagine, this can add up to thousands of dollars a year.
What Is a Living Trust?
A living trust is a legal document that allows you to transfer ownership of your property from your individual name to your name as trustee of your trust so that all of your assets are 'owned' by the trust. Unlike any other kind of trust you, as the creator and trustee of the trust, have absolute, 100% control of the property in the trust during your life and capacity. Nothing changes except the name on the title to your property. The trust is both revocable and amendable during your life.
Upon incapacity, your 'backup trustee', named by you in the trust instrument, automatically steps in and administers your estate without court involvement which is usually a conserveratorhsip.
Upon death, your 'backup trustee' automatically steps in and distributes your estate according to your instructions. No probate is necessary because you owned nothing in your own name; your trust 'owned' all of your assets.
T/F: A will avoids probate.
False: Having a will does not avoid probate; on the contrary, a will only becomes effective after being admitted to probate. A will, therefore, ensures that probate will be necessary (unless your estate is very small).
T/F: Jointly owned property avoids probate.
Perhaps: But joint ownership does not guarantee that probate will be avoided in all circumstances and can create unanticipated problems.
Joint tenancy with right of survivorship is the most common way in which people jointly own property, particularly spouses. Upon the death of one joint owner, the remaining joint owner automatically becomes the sole owner of the property without probate. However, upon the death of the surviving owner (or if all owners die at the same time), the property is subject to probate. Joint ownership merely postpones probate.
Creating joint ownership can subject your property to risk of loss. For example, if a widow puts her property into joint ownership with her son, this property is available to the creditors of the son even though the property is really 'owned' by the widow.
T/F: A power of attorney avoids probate.
False: A power of attorney is automatically revoked upon the death of the maker. A power of attorney merely gives someone else the right to act on behalf of another during life. It does not empower another to distribute assets after the maker's death even when there is a will.
T/F: Avoiding probate avoids estate taxes.
False: Estate taxes are payable regardless of whether an estate is probated or not. Probate is merely the administration of an estate through the court process. To avoid probate is to remove the court's involvement in estate administration. Estate tax avoidance is an entirely separate matter.
T/F: Avoiding probate is necessary only if the estate is more than $2 million (in 2008).
False: This myth results from confusing probate avoidance with estate tax avoidance. An estate of $2 million or less is not subject to estate tax. However, such an estate is subject to probate.