It seems like everyone wants to avoid probate.
While there can be benefits to avoiding probate, most of my clients are best served by planning for their estates to go through probate, rather than using a revocable living trust. There are a lot of myths about why probate should be avoided, particularly in Washington State.
1. Probate is expensive
In Washington State, this is false. This comes from states like California (thanks Hollywood) where the court fees are set by statute as a percentage of the total value of the estate. In those states, even a modest estate of $1 million, will pay $23,000 in court fees. Thankfully, Washington State does not have statutory fees. Instead, the filing fee for probate in most counties is less than $300, and the other required expenditures (like publication of the death in a newspaper), are relatively small. Attorney fees are additional, and unless there is a will contest, are usually a few thousand dollars.
2. Probate is complicated and takes a lot of time
Again, in Washington State, this is false. Most probates in Washington take less than a year to complete — where as most probates in California take more than 18 months. If the will gives all the powers that it should (hint: this is why you should use an estate planning attorney to draft your will), then the Personal Representative won’t be required to post a bond in order to serve, and he or she can have non-intervention powers, which means that the court doesn’t need to weigh in on every decision along the way.
3. My estate will pay more taxes if I go through probate.
False. The government doesn’t care if your assets are in a revocable living trust or whether they are in your own name — in their eyes, it’s all yours, and it’s all taxable. There is a significant difference if your trust is an irrevocable trust. With an irrevocable trust, the grantor gives up all control over the property in the trust. Once an irrevocable trust is made, it can’t be changed (hence the name), and it is totally outside your control (even if it is being managed for your benefit). Irrevocable trusts are not frequently used. They are most helpful for beneficiaries who have special needs and would otherwise qualify for government benefits, or for families or individuals with a high net worth (think $10 million or more).
4. Probate will let everyone see my business.
Okay, this is true. Probate is a court process, and we have open courts. Your will and the other documents that are filled can be viewed by the public. Hearings, to the extend that there are any, are open to the public. For average people, this may not be a big deal. Many people die every day, many probates are opened and many are closed every day. Unless you are someone who has a particular need for privacy, the sheer volume of probates may be sufficient to give you and your family enough privacy. However, if you want more privacy than being one in the crowd, a revocable living trust is a great tool for preserving privacy.
5. Probate is a lot of work for my Personal Representative/A trust will be easier for my family after I’m gone.
False. Trusts aren’t magic, and when you pass away, someone still has to gather up all of your assets, pay your debts, and distribute the rest to your heirs. In fact, the work to be done after you pass away is… well, pretty much the same. The biggest difference is that a trustee doesn’t have to let the court know at all what happens to your assets. In fact, with a trust, there’s a risk that there will be more work to do because some asset didn’t get transferred into the trust and now you need both a probate process and the termination of the trust.
6. A trust will take care of me when I’m incapacitated but alive.
True. This is one of the biggest reasons, beyond privacy, to have a revocable living trust. While you are the first trustee, if or when you become incapacitated, the trustee role automatically transfers to the person you picked to be next. Absent a trust, you would need either a second document (a Durable Power of Attorney, signed and notarized within the last 5 years) or a court order.
If you are thinking about whether you need a trust or another path for your estate, give me a call. Let’s talk about what plans will work best for your unique situation.
