What’s So Bad about Probate?

A company named Schumacher Publishing owns and runs www.estateplanning.com and licenses articles on various estate planning topics; lawyers and financial planners can pay to use some of Schumacher’s articles on their websites.  The company recently contacted me to try to get me to purchase one of their packages, and earlier today I looked at some of their articles, which are generally accurate and very well-written.  (No, I won’t be buying, because I like writing my own articles and blog posts.)  One of Schumacher’s articles, “Understanding Living Trusts,” asks the question “What’s so bad about probate?”  I don’t quite agree with Schumacher’s 4-part answer.  In fairness to Schumacher, I point out that every state has its own probate and trust laws, so it is difficult to write a short summary that applies accurately to all 50 states,but here are Schumacher’s points about what’s so bad about probate and my rebuttal about Massachusetts probate.

Schumacher’s point: “It can be expensive. Legal fees, executor fees and other costs must be paid before your assets can be fully distributed to your heirs. If you own property in other states, your family could face multiple probates, each one according to the laws in that state. These costs can vary widely; it would be a good idea to find out what they are now.”

Brian’s response: I agree with the point about the multi-state estate being complicated, and it is often a good idea to use a trust to avoid probate if you own real estate in other states.  Schumacher’s point about probate being expensive, however, is twisted to make a trust sound like it is always preferable; a trust can also be expensive for the same reasons listed above, as legal fees, Trustee’s fees and other costs must be paid before the assets can be fully distributed to your heirs.

Schumacher’s point: “It takes time, usually nine months to two years, but often longer. During part of this time, assets are usually frozen so an accurate inventory can be taken. Nothing can be distributed or sold without court and/or executor approval. If your family needs money to live on, they must request a living allowance, which may be denied.”

Brian’s response: It’s not so much the probate process itself that takes time, but rather the processes of selling or otherwise dealing with real estate and other assets, and filing income tax returns and estate tax returns, that take time.  Those are all matters that would have to get done even if you had a trust. The issue that probably is the main reason for any estate to be held open for over 18 months is final clearance from estate tax authorities, and that delay has nothing at all to do with the probate process; a trust would also have to be held open while waiting to receive written approval of estate tax returns from the Internal Revenue Service or the Massachusetts Department of Revenue.  Schumacher’s other points about probate are also invalid and are twisted to make a trust sound like it is always preferable.  Assets are not frozen in Massachusetts, and, similar to probate, with a trust nothing can be distributed or sold without the Trustee’s approval.  Similar to probate, if the family needs money to live on, they can make a request to the Trustee, and the Trustee can deny it.

Schumacher’s point: “Your family has no privacy. Probate is a public process, so any “interested party” can see what you owned, whom you owed, who will receive your assets and when they will receive them. The process “invites” disgruntled heirs to contest your will and can expose your family to unscrupulous solicitors.”

Brian’s response: I agree that a disgruntled heir can contest your will, and in Massachusetts that person may even be given basic instructions early in the probate process on how to do it, so I often suggest a trust to avoid probate if a will contest is thought to be a real possibility.  I generally disagree, however, about how public the Massachusetts probate process is, since the only way for anybody, including an unscrupulous solicitor, to learn what you owned or owed, or who received what from your estate, is to go to the Probate Court during its business hours and to ask to see the probate file; the information being sought may not even be in the file yet, so return trips to the Probate Court could well be needed to get to see that information.  It therefore can take a lot of time and effort on somebody’s part to get to see details in the probate file, even though it can technically be categorized as public.

Schumacher’s point: “Your family has no control. The probate process determines how much it will cost, how long it will take, and what information is made public.”

Brian’s response: Your family also has no control over the Trustee, and the Trustee’s processes will determine how much the trust administration will cost and how long it will take.  The probate process in Massachusetts is fairly simple, and will become simpler on July 1, 2011, when the Massachusetts Uniform Probate Code is scheduled to be fully implemented. With proper guidance, the executor or personal representative of an estate can handle many tasks without incurring large costs, having lengthy delays, or needing to rely much on a lawyer.  In fact, many of the probate estates I’ve handled have cost less than the cost of a living trust.

Brian’s conclusion: As you can see, a writer who is looking to promote trusts can twist everything to make probate sound bad, and to make trusts seem like magic. As I’ve pointed out in an earlier blog post, a choice sometimes has to be made in Massachusetts between avoiding probate and protecting your home from creditors. http://elderlawblog.info/2010/04/02/protecting-your-home-from-creditors-in-massachusetts There is no significant reason to fear probate in Massachusetts, and there are far more costly estate planning issues to deal with, such as (1) On a Massachusetts estate of $1,000,000+, the minimum Massachusetts estate tax is $33,200.  (2) An elderly person has a roughly 10% chance of spending 5 years in a nursing home, at an average total cost in Massachusetts of over $580,000.  (3) A disabled person on SSI who inherits assets directly, instead of through a special needs trust, loses SSI benefits and is required to spend everything all the way down to $2,000 before getting back on SSI.

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