LaBre on Law: To avoid probate — or not to avoid probatePublished 6:11pm Tuesday, November 6, 2012
By William L. LaBre
She had lost her husband five years ago. Now, she was ready to talk about her own estate.
“I don’t want my kids to have to go through probate, Mr. LaBre. I want everything to be easy for them. How do I do that?”
“I’ll tell you how, but I don’t think you’re going to like it,” I replied.
“Well, I’ve made up my mind, and that’s that. You just tell me how to do it.”
“OK. The first way is to put all of your kids’ names on your deed, bank accounts and everything else you have, as “Joint Tenants.” Then, when you die, they’ll take the property automatically.”
“Good idea!” she exclaimed. “That’s what my husband, God rest his soul, and I did. It worked for me. So what’s the matter with that?”
“Well, let’s see what happens both before you die and after,” I said.
“Before you die, if one of your kids gets a divorce, then your child’s share could become a part of the ‘marital pot,’ particularly if the child lives in Indiana.
“And, if one of your kids goes bankrupt, then their share of the property is a part of the Bankruptcy Estate, and the Bankruptcy Trustee will take it from you.
“And, if one of your kids gets sued, then their share of your property can satisfy any judgment.
“And, kids, sometimes, take property from a parent. If a kid takes your property, then there’s nothing you can really do: You gave it to them.”
“Wait just a minute there,” she said. “The idea is that they get it when I’m dead, not when I’m alive. While I’m still alive, it’s my property.”
“Not if you put their names on it. Then it belongs to everyone whose name is on the title.”
“Well, I have good kids and good in-laws, and everyone in my family is responsible, and all are safe drivers all the time. That’s how my husband and I raised them. So there. Now, what’s the problem after I’m dead?”
“After you’ve passed, all the kids will be on all of your property. But some may not want any part of the land, some may want money, and some may want a part of each. By simply putting their names on your property, then you won’t decide how it will be distributed. Instead, they have to deal with those questions while they’re still emotionally distraught over your death.”
“I can see how that could be a problem,”,she grudgingly admitted. “They’re all good kids, but they do have different ideas. So, what about this ‘living trust’ I’ve heard so much about? Doesn’t that avoid probate too?”
“Yes and no,” I replied.
“You lawyers; can’t you just give a straight answer?”
No straight answers
“Sure,” I said. “But the ‘straight answer’ would be wrong. You see, to make a Living Trust work, you first have to draft the trust. Then you have to put all of your property in the trust. That means a deed to your property, changing all of your accounts to show the trust as the owner, and signing a bill of sale to put your household goods in the trust. Then, no matter what you buy until you’re dead, you have to make sure that everything is titled in the name of the trust.”
“Who can do that? Do you think that I’ll always remember to make sure that everything is in the trust’s name?”
“No,” I said. “I don’t. That’s why, in addition to drafting a trust, you also have to draft a will called a ‘Pour Over’ Will. That will devises any property that you didn’t place in the trust to the trust.”
“Now wait just a minute! You said trust, and then you said will. I thought that the whole idea was that there would be no will, just the trust.”
“That’s why I had told you ‘yes and no’ about the trust. After spending all of the money to draft the trust, and place all of your property in the trust, you still have to have a will to catch anything that you forget to put in the trust until you die.”
“So, what you’re telling me is that I have to have a will anyway.”
“That’s what I’m telling you. But think positive; if you want the trust then you get to spend thousands of dollars and then still have a will.”
“It sounds like the only positive is in your wallet!”
“You’re very smart,” I said.
“It sounds like a will is the simplest and cheapest,” she said.
“True,” I replied. “That’s why, in almost all cases, I recommend a will rather than those probate-avoiding devices.”