Part Two: Death Planning
I started my law career as a litigation attorney. In and out of the court room for eleven years. In late 1990, I first caught wind of a new concept – the living trust. I was astonished to learn that by establishing and “funding” a trust (transferring your assets into it) you control your assets the same as before but the assets transfer to your heirs at death without a probate court proceeding. As most people know, wills have to be “probated” at death – a court proceeding to prove the will valid – before the executor is authorized to distribute the assets to the heirs.
Having encountered numerous delays and obstacles in probating wills, I took to this concept immediately and never looked back. Now, I would be able to put my client in control instead of having to prepare a court petition, serve it on the heirs and potential heirs, get proof of service along with the petition back to the court, go through whatever hoops the court called for (including one case where we were required to provide that someone who would have been over 120 years old was no longer living) and then wait for the judge to rule -- weeks, months and sometimes years later. In other words, a process over which we had no control. Meantime, houses could not be listed or sold, bank accounts were inaccessible, etc.
Recently, a client of our firm whose father died in New York listed his father’s home in Virginia for sale, found a buyer, signed a contract of sale and then contacted me to probate the will so that we could close. He was shocked to learn that the probate would take one to two years. He had to undo the sale, pay all the buyer’s expenses and now has to carry an empty house in Virginia for an indeterminate time – a situation over which he has no control. Imagine this – if his father had a living trust he could have sold the house the next day!
Your writer has not found anything published about the “social cost” of probate. Imagine if we were to take all of your sons and daughters, and their spouses, and put them in business together for a year or two. Most people would shudder at the thought – yet this is exactly what happens in a probate proceeding. No wonder it is so common to find that after the probate of a will is completed brothers and sisters never talk to each other again. Settling a trust (i.e., closing it out at death) usually takes weeks or a few months at most. By settling the estate so much more quickly, having a trust goes a long way towards keeping your family together and avoiding the high “social cost” of probate.
Not only is considerable time saved in avoiding probate court proceedings, but tens of thousands of dollars are often saved as well. Trustee’s fees in “settling” a trust – closing it out at death – are a fraction of what the executor’s fees are under a will. Attorneys’ fees are similarly much less when a court proceeding is no longer required and the estate is settled so much more quickly. Time is money and time saved is money saved.
Finally, court proceedings are public records. When someone dies with a will, anyone may go down to the courthouse and look up how much thy had, who they left it to and where the heirs live. With a trust, since there is no court proceeding, no one knows how much you had or who you left it to except the people named in the trust – the only people whose business it is.
Again, by planning for death with a revocable living trust you are taking back control from the courts and government and giving it back to your loved ones.