Avoiding Probate
You may have come across the idea that you should ‘avoid probate.’ Is that true?
My opinion is that it is not always necessary or desirable to try to avoid probate in Washington State—explained more below. But if avoiding probate is one of your goals, and the time- and money-investment is worth it to you to try to avoid probate, then you should consider doing so.
Why do people consider avoiding probate?
Probate means to ‘prove’ a Will. With probate, a Will is submitted to the court, with a petition asking the court to find that the Will is validly created, and that the nominated Personal Representative should be appointed, with their appointment evidenced by the Superior Court Clerk’s issuance of Letters Testamentary. Letters Testamentary is simply a document stating the name and legal authority of the Personal Representative to handle the affairs of the deceased person’s estate. Probate can also happen when there is no Will, in which case someone petitions the court to be appointed the estate ‘Administrator’ and receives Letters of Administration.
One common reason to try to avoid probate is privacy. If a trust is part of your estate plan, then that is a private document (unless it is a testamentary trust; more on that in another blog post). Usually, a trust is administered privately by the trustee, and information about the decedent’s assets and how their assets get distributed is private—unlike a Will, which is filed with the court after death and is publicly viewable. Just keep in mind that a trust could become publicly viewable if a lawsuit arises concerning the trust. So a trust, while usually a private document, is not immune to publication in the court record if the trust is the subject of a lawsuit.
It may be that anything having to do with a court or a judge seems intimidating and nerve-wracking. But in most of the cases that Jordan Law Firm handles, the probate process is not adversarial—meaning, it is not a lawsuit in which people are fighting a court battle. The probates we handle are more transactional in nature; we follow the procedures set out in RCW 11 on probate law, and sometimes that involves asking a judge or commissioner to sign official paperwork in the case. But nevertheless, the idea of having a court involved in any way, may feel uncomfortable, and perhaps that is why people want to avoid probate.
It could be that people have heard that probate is more expensive or time-consuming than the non-probate alternatives. That is not necessarily true, and it is worth evaluating the circumstances in each case to determine 1) whether trying to avoid probate is more cost-effective than not; and 2) whether your goals can be accomplished through the alternatives to probate.
The alternatives to probate take time and incur costs just like probate does—so to me, thinking that avoiding probate saves time and money is not a good reason to try to avoid probate. For example, if a person has a revocable living trust, and if they have added (or ‘funded’) all of their probate assets (assets that would otherwise go through the probate process to transfer them after death) to the trust—they will avoid the probate process. But the trustee still probably has to take the time to do all of the things the Personal Representative would have done, such as gather the assets, find out about all of the debts and bills of the estate, handle tax matters, and distribute assets according to the trust. And they will probably get the advice of a lawyer, financial advisor, tax professional, and maybe a real estate agent to administer the trust, all of which costs money in the same way getting advice during a probate does—and it can take the same amount of time, too.
Should you try to avoid probate?
Again, my opinion is that it is not always necessary to try to avoid probate. In Washington State, there is a fairly streamlined probate process, and attorneys who help with probate do not take (or should not take) a percentage of the estate as their fee. That said, if, for whatever reason, avoiding probate is important to you, and if you want to invest time and money into avoiding the probate process, then we should consider doing that. In many cases, it does not necessarily do harm to try to avoid probate. Setting your estate up to transfer assets to your heirs and beneficiaries through trusts, beneficiary designations, survivorship titling, etc., are simply alternative ways to accomplish your goals.
How can you avoid probate?
The need for probate is tied to how a deceased person’s assets are owned or titled. If you want to avoid probate for your estate, then you must ensure that all of your assets can legally transfer to someone else by other means. Consider the following (the key word is ‘consider;’ there are always pros and cons to the following strategies)…
For real estate, consider transfer on death deeds or survivorship titling. Importantly, before you gift real estate to someone while you are still living, first consult with a tax professional on the tax consequences of such a transfer.
For financial accounts, consider adding beneficiaries. Carefully think through how your beneficiary designations are set up, and how the designations harmonize with the other parts of your estate plan.
For business interests, consider assigning them to your trust, if you have one, at death. Talk with a tax professional first to be sure this is advisable in your case.
These are just a few examples. Talk with your attorney and financial advisors about the recommended steps if you are trying to avoid probate for your estate.
An example where a client decided to try to avoid probate
Here is an example where the client decided it was appropriate in their case to try to avoid probate… The client was a single person (not married) and had two adult children who got along with each other. The client’s assets were their home, checking and savings accounts, an IRA retirement account, and personal effects. In this case, avoiding probate was important to the client as a way to try to make the estate private and simple for her kids to handle. She opted to create a revocable living trust, and to deed her home to the trust. She also changed her checking and savings accounts to be trust accounts, and assigned her personal effects to the trust. She added her kids as 50/50 beneficiaries of her IRA. This way, each of her assets was set up to be legally transferred to others after her death without the need for probate. After the client’s death, her successor trustee (her daughter) would get access to her bank accounts and distribute them to the trust’s beneficiaries (the two kids). The trustee could sell the home and distribute the proceeds to the beneficiaries. The IRA would be accessible to the beneficiaries with proof of the client’s death.
An example where a client decided probate was okay
Let me give you a real-life example of when I advised someone on making their Will where their estate would need to go through probate (and that was the best option to accomplish his goals)…An elderly client’s only valuable asset was the home, which was now worth over one million dollars. The client had several living adult children, and a deceased child with several living children (client’s grandchildren). There was significant disharmony in the family, with arguments and disagreements being commonplace among family members. The client’s number one goal was that his estate plan would be as low-cost as possible because he was on a fixed income and did not use a credit card. His second most important goal was to specify in great detail how the proceeds of his home were to be divided among more than ten of his children and grandchildren. A trust was out of the question. It was too expensive to create, and he feared his family members would not easily understand how a trust works and so it was too complicated for his tastes. A transfer on death deed was also not appropriate, since he would have to make over ten people who did not get along with each other the co-owners of the property after his death. That was a recipe for disfunction and lawsuits. Instead, we drafted a simple Will with percentage distributions of the real estate proceeds to each family member. After his death, his Personal Representative would go through probate, be the single decision-maker of the estate, sell the property, and distribute the proceeds according to the Will. In this case, going through probate made the most sense given his assets, family circumstances, and planning goals.
Conclusion
There are valid reasons to try to avoid the probate process. Trusts, if funded properly, beneficiary designations, transfer on death deeds, and other methods are effective means to try to avoid probate. But avoiding probate is not always necessary or advisable.
To get advice from Sarah on your circumstances, schedule an Initial Consultation.
