Why Avoid Probate?
In recent years, state legislatures, with the active assistance of the trusts and estates and real property bars, have developed ways to help individuals minimize, or avoid entirely, the probate process when they transfer assets on their death. This trend makes sense as a public policy matter, because probate can be expensive and time-consuming. For example, in California statutory fees are set on a sliding scale as a percentage of the gross value of the estate. For an estate of $250,000, the minimum statutory fees would be $16,000 for the executor and his attorney. The court could award more for “extraordinary service.” When a decedent’s only asset is a modest house that she wants to transfer to her daughter, that is a significant cost. Also, some people may want to maintain their privacy and a probate proceeding is a matter of public record. Just as importantly, probate matters clog the courts at a time when litigation is increasing and states are challenged to fund the courts at adequate levels.
Although probate can be expensive, avoiding probate can be complicated. Typically, an individual owns several different categories of property. Even a person of modest means could own a home with furniture, clothing, jewelry, a bank account, an insurance policy, and perhaps stocks and bonds. This property can be held under various legal arrangements. For example, cash could be held in bank accounts, certificates of deposit, safe deposit boxes, or in tax-advantaged retirement accounts. In the old days, most of this property was transferred on the death of the owner either by will or under state law through intestate succession. Both wills and intestate succession require a probate action in state court.
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