Probate vs. Trust Administration – A World of Difference

16 Jul, 2018//Posted by : admin//Category : Uncategorized

Transfers of property on death has never been automatic. In every culture there is some ritual or procedure that must be followed to pass wealth from one generation to the next. For generations in California, that process was usually conducted through the probate division of the Superior Court of the county in which the Decedent resided.

To transfer property through the probate court did not require a Will, although a Will could be “proven” (what “probate” means) and the Decedent’s wishes as expressed therein are to be followed by the Court and the Executor appointed under the Will (“testament”). A Will does not avoid probate court, it gives it direction. When a Decedent dies without a Will (“intestate”), his or her estate will still be subject to probate court administration if the Decedent has not used other forms of estate planning, such as joint tenancy or pay on death accounts with financial institutions.

Real estate is the main reason estates will end up in probate court. When someone dies owning title to realty in their name alone, there is no other process that can legally convey the property to their heirs or the beneficiaries named in a Will.

Anyone who has been through the California probate court process knows that it takes time, usually a year or more. It is also very expensive, as attorney fees are a statutory percentage of the estate’s value and there are court costs, newspaper publication, probate referee fees, and usually a fiduciary bond premium to pay. Because of the delay and costs, people who own substantial property are usually well advised to avoid the probate court usually through a living trust estate plan. In defense of probate court, there are some estates that are administered better through the supervision of a probate judge. The procedure and requirements are there to ensure that the beneficiaries are protected. That is done by the accounting and other documentation required by the local and state rules. Also, in families where there is a lot of animosity or suspicion, it is much more assuring to interested parties when a person in a black robe is mediating, deciding, and making orders.

Having said that, the predominant estate plan for the wealthy has been family trusts. They have become more popular and accessible to the middle class in recent years as modern word processing and legal education has helped the legal practitioner to offer trust estate plans at relatively low cost. While the cost of such a plan is now affordable to the trustors, the real benefit is to their heirs, that is, the ultimate beneficiaries, upon their death.

Unlike probate, a post mortem trust administration is greatly simplified. Usually, distribution can be made in less than a year, and the attorney fees and court costs are greatly reduced, a fraction of the statutory fees in a probate case. There is no filing of inventories or accountings with the court, no waiting for hearing dates, and the trustee and the beneficiaries can agree to shortcut notice requirements and change the distribution scheme by agreement among each other. The disadvantages are that sometimes trustees overstep their authority, abuse their discretion, misappropriate funds, and delay distribution and their other duties unreasonably. The informality of trust administration when unpopular can cause suspicion among beneficiaries who may think they are hiding, stealing, or abusing some obligation, real or imagined. The disadvantage of trust administration, in other words, is the main advantage of probate administration, that is, court supervision is sometimes advisable.

Be that as it may, the revocable living trust estate plan is here to stay, and as long as the trustee named as successor to the trustors has good counsel, good records, and good ethics, it is vastly more efficient and less costly than grinding an estate through the probate court.

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