The number-one solution to avoiding probate put forth by estate planners and most books on the subject is the creation of a living trust. I have no argument with this and have done thousands of trusts myself for clients. My book, Living Trusts for Everyone, concentrates on this solution. But lots of people can avoid probate with even simpler methods by avoiding the possible cost and complexity that comes with a trust.
Critics of my strong advice to avoid probate typically have two arguments. First, they say that probate isn’t really all that bad, and in fact protects the heirs. Second, they say that there are already procedures in place through the courts to shortcut the probate process for simple low-asset estates with typical distribution plans. Those arguments have some merit in very limited cases. These court procedures are simpler than full-blown probate, but still involve a court process. There are even simpler ways to avoid even summary and small estate court procedures.
California, for example, allows for a quick assignment of assets to a decedent’s heirs if the total assets do not exceed $100,000. It is possible to use this procedure without an attorney, but it’s not simple. Other states, such as Michigan, have the threshold at $22,000. Many states have similar thresholds and procedures, but there are fees and paperwork that apply and an attorney is often required to push the paperwork through. Also, some of these transfers of ownership through the simplified plans are not recognized or accepted by real estate title insurance companies and financial institutions, so the estate might have to be fully probated anyway.
The Superior Court in California, which handles probate cases, offers instructions on how to use the simplified process in that state. The “simple” instructions are eleven pages of single-spaced type. And as to real estate, the “simplified” process applies only to property valued at less than $50,000 or less than $150,000, depending upon the procedure. I don’t know how many homes and real estate are in that valuation range, but given that the average price of California real estate is $525,000 according to Zillow.com, I expect few people qualify. The procedure also requires that all the heirs consent to the assignments using the process, which might not be in line with the wishes of the deceased. If they don’t consent, there might be a full-blown probate anyway.
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- Affidavit of Heirship. This is available if there was no will and the only remaining asset is real estate. All the legal heirs at law must agree to the affidavit, which has several requirements, including that the deceased had no debts at death. Someone (presumably an attorney) has to figure out how to write the affidavit to comply with the law, and after it is signed, witnessed, and notarized, it is filed with the local recorder of deeds. Sounds pretty simple, but the problem is that many real estate title companies and banks do not view the affidavit as a legal transfer of title and will require probate before that property can be mortgaged or sold.
- Small Estate Affidavit. This is similar to the affidavit of heirship, except it does not apply to real estate, and the assets other than real estate must be less than $50,000, with all heirs agreeing on the assignment of these assets to them. This is filed with the probate court, but there is no court hearing. There are fees that apply. Again, those institutions servicing bank and brokerage accounts as well as other investments will often refuse to accept the affidavit and will require a probate court order before they hand over the funds.
- Muniment of Title. This allows the transfer of real estate to named heirs under a will by using an affidavit. It does not apply to any other kind of property. The real estate must be specifically described and given to the heirs in the will, and there can be no debt owed on the property. This procedure is handled in the probate court but has limited use due to its requirements. It is a probate process.
For another example, there are probate laws in some states that allow for so-called independent or unsupervised probate procedures. These have some advantages over regular supervised probate in that each and every decision during the administrative process does not have to be approved by a judge. However, the time constraints still apply as well as the court fees and taxes. The attorney fees may also be less, but the fact is that it is still a probate court process with all the other disadvantages and costs.
Attorneys have the option in Michigan and some other states as to which probate process they will use for an estate. Those whose interest is in maximizing attorney fees and not in a quick and cheap independent process will opt for the paperwork and court appearances in heavily supervised administration, even though the unsupervised process would work just as well. Clients will not know the difference. Just sayin’.
(To be continued...)
This excerpt is taken from "How to Avoid Probate for Everyone: Protecting Your Estate for Your Loved Ones" by Ronald Farrington Sharp. To read other articles of this book, click here. To buy this book, click here.
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