by Archie M. Richards, Jr., CFP^®
January 7, 2002

When Sally's father died some years ago, probate wasn't a problem. He had held most of his property in joint name with his wife Eva. Assets in joint name pass to the survivor without a probate judge supervising the transfer.

But the sadness Sally felt about Eva's subsequent illness and death was worsened by the agonizing process of probate.

Eva developed Alzheimer's disease, and the family agreed that Sally should take control of the mother's property. Sally hired an attorney and appeared before a probate court to be named as guardian. It was a big surprise when she learned she had to submit financial reports to the judge about her expenditures. Not only that, the proceedings were open to the public. Family matters became public matters.

Sally's ability to control her mother's property immediately came to a halt upon Eva's death. Until the probate judge approved, she wasn't permitted to spend or sell anything.

The estate was worth about $600,000. Sally had thought that an estate didn't need to be probated if the value was less than the federal estate tax credit. (In the year Eva died, this was $675,000.) But Sally's attorney explained that probate and federal estate taxes have little to do with one another. The transfer of property in Eva's estate was indeed subject to the jurisdiction of the probate court.

Sally was required to give the judge 1) a list of Eva's assets, 2) the names and addresses of the witnesses to Eva's will, 3) the beneficiaries named in the will, and 4) the people who, according to the state's law, would have inherited had Eva died without a will.

Years before, Sally's father had acquired a lakeside cabin in an adjacent state. Since it hadn't been sold, the same information had to be given to a probate judge in that state as well. (Frederick P. Davies, Esq., an estate planner in Syracuse, NY, kindly offered suggestions for this column.)

Sally had one living brother. Another brother had tragically been killed in an automobile accident prior to his mother's death. The deceased brother's widow and their two teenaged daughters were given an opportunity to argue before the probate judges as to whether Eva's will was valid. The widow had no objection to the will, but the judges nevertheless appointed guardians to represent the interests of her minor children, increasing the costs and delays.

Finally, when the possibility of a will contest was resolved, the judges appointed Sally as Executrix of the estate, as Eva had intended her to be.

The wife of Sally's living brother began to express resentment about the delays. The probate proceedings were a continuing reminder of the loss of Eva, and some of the bad feelings were expressed against Sally. She could only imagine how much rancor would have resulted if a relative had actually contested the will.

The fees for two probate courts, for the attorneys and guardians, and a modest fee to Sally totalled almost $30,000. Moreover, all information about Eva's estate was a matter of public record. The widow of Sally's deceased brother received calls from people who were probably scam artists, taking advantage of personal information made public by probate courts.

The lakeside cabin was sold, terminating the probate proceedings in that state. But probate jurisdiction in Eva's home state didn't end even when her estate was closed. Eva had created a trust (in which one party owns property for the benefit of others). But she had not created the favorable kind of trust that would have avoided probate - a living trust into which she could have put her assets when she was competent. No, Eva had directed in her will that a trust be created after her death.

Unfortunately, the trust had been drafted by an attorney who was not a specialist in estate planning. Not only had he suggested a trust under the will, which was a mistake, but the powers given to the trustee were not broad enough. Sally found to her dismay that, as trustee, she was required on a continuing basis to submit financial reports to the judge.

Sally dearly wished that Eva had established a living trust and avoided most of the problems of probate.