Is "avoiding probate" a scam?

[vafoodie]

designed by lawyers to make you buy useless trust packages? I live in Virginia. I have one husband and one adult child. I'm thinking of doing my own will. Is probate really that big a deal? Why do so many people have trusts? My own father was bamboozled into getting a trust that we had to redo at the end of his life. The lawyer who did it was no longer practicing. It was one of those deals where they lure people in with a steak dinner and then sell them a trust. My father was a retired Navy chief originally from the Philippines, so I suspect having a trust made him feel like he'd made it.

 

[COcheesehead]

I am not a lawyer, but my understanding is that if you have all the beneficiaries in place and other property paperwork in order, a trust will offer only limited benefits which may include legal protections and the ability for a third party to manage assets if you become incapacitated.
A trust also cannot be self managed so there’s that.

 

[Mykle57]

I'm with you. Friends and relatives tell me how they have carefully$ crafted$ wills/trusts to account for every possibility, no matter how unlikely.
I made sure my financial accounts list my beneficiary. In the unlikely event I still own property that'll need to go thru probate.
My surviving parent recently passed away, they had trusts, didn't seem to have helped them any.
Now if I had big bucks or sizable property interests, that'd be a different answer.

Sent from my SM-G998U1 using Early Retirement Forum mobile app

 

[qwerty3656]

We have our kids as beneficiaries on all our financial accounts. The issue seems to be dealing with the things like our home and cars. (at least in Michigan, you can't seem to have more than 1 beneficiary on a home)

 

[jim584672]

Can't speak to your example. But in NY avoiding Probate avoids Medicaid Estate Recovery.

 

[PatrickA5]

In my state, you can have TOD deeds on homes. If everything else has beneficiaries assigned, you can probably get away without going through probate. My dads estate (house, car, financial accounts) all got transferred without probate. A will is still advisable as a backup.

A trust can be useful in some cases. I went to a couple of Trust seminars. Didn't get any steak though - only store-bought cookies. The lawyer putting on the seminar will give you just enough information to try to scare you into a trust. To get a more detailed presentation, you'll have to sign up and meet with the lawyer. Usually, these are free meetings. But hurry! For a limited time only!

When asked about a price, one of the lawyers said that they "usually" charge $10K and up to $20K, but they were having a "special" that brought the price down to around $5K for simple trusts, pour over wills, etc. He was pretty convincing that if something happened to me, then my DW would end up leaving all of our money to "Biff, the pool boy" and our kids would be left out. We don't have a pool.

 

[qwerty3656]

In my state, you can have TOD deeds on homes. If everything else has beneficiaries assigned, you can probably get away without going through probate. My dads estate (house, car, financial accounts) all got transferred without probate. A will is still advisable as a backup.

Can the TOD list more than 1 person? We have 3 sons, but the TOD could only transfer to 1 of them.

 

[Texas Proud]

Can't speak to your example. But in NY avoiding Probate avoids Medicaid Estate Recovery.

I think that is in a number of states... heck, probably all since it is a federal thing... but the trust must be in place for awhile to count... (IIRC)...

 

[Texas Proud]

Trusts are of limited value now as the exempt amount has risen over the years...


Now, there might be some states that have laws that make it worth while..



Me, I like to keep it simple... no need to spend a lot of money trying to save a few cents...

 

[Sunset]

In my state, you can have TOD deeds on homes. If everything else has beneficiaries assigned, you can probably get away without going through probate. My dads estate (house, car, financial accounts) all got transferred without probate. A will is still advisable as a backup.

.....

+1

In IL a person can now have TOD on a home so that avoids probating a home.
We also have beneficiaries assigned on all accounts possible.

Many States have a thing called a small estate, where you can skip probate, in IL the estate (things not already TOD/POD) has to be under $100K. It worked well for us as household furniture is worth $3K and a car was worth $20K and a forgotten to assign beneficiary for bank account was small as well.

I still think a Will is useful, even if assign everything via POD/TOD, just in case one forgets something.

 

[ExFlyBoy5]

Trusts can be useful, but IMHO, in limited circumstances...such as having a disabled child. Otherwise, I agree they are great vehicles to increase the income of lawyers.

I am a licenced (non-practicing) attorney and I don't have a trust. Accounts have beneficiaries named (or TOD) and we have basic pour over wills.

Oh, and we have a neighbor who is a recent widow. They have a complex trust that has already caused issues for her and of course, the attorney who drafted it is no longer around.

 

[Souschef]

Trusts are of limited value now as the exempt amount has risen over the years...
Now, there might be some states that have laws that make it worth while..
Me, I like to keep it simple... no need to spend a lot of money trying to save a few cents...

I did a trust when the limit was $1 mil which is easy to exceed in CA. It was a real PITA because my wife passed away and I had to divide it into 2 trusts along with the assets. It took me 9 years to spend the trust down to where I could close it. There was a clause where if the value was less than $40K I could close the trust, which I did.
Plus I had to file a 1041 every year.

Since then, I remarried, and we had an estate plan drawn up for about $500. It included POA's for financial and medical. plus pour over wills.
We have TOD's on all our accounts, and they all have multiple beneficiaries.


As far as avoiding probate, it keeps the affairs out of the public record, plus any time you get involved with bureaucracy it tends to complicate and delay things.

 

[Dtail]

Trusts are of limited value now as the exempt amount has risen over the years...


Now, there might be some states that have laws that make it worth while..



Me, I like to keep it simple... no need to spend a lot of money trying to save a few cents...

Irrevocable Trusts still can have value, if one's goal is to protect assets, which of course is different from the probate concept.

 

[misanman]

I've mentioned before that I have been the personal representative for both a probated estate and one with a trust. My experience was that going through probate wasn't onerous. This was in Michigan so I suppose it varies by state. In the case of a trust, I think it's important to have a successor trustee who is trustworthy beyond any doubt. I felt like I could have gotten away with a lot when I was administering the trust.

So I will do what I can to make this simple for our heirs but I don't have any current plans to get a trust. Our lawyer agrees that a trust is optional for an estate as straightforward as ours should be.

 

[marko]

It might depend on the size and complexity of the estate. Thanks to Covid, I'm on year three waiting for a large estate to settle. A trust can make the settlement a whole lot faster.
As also noted, an irrevocable trust also will avoid a Medicaid clawback.

DW and I have three separate trusts in order to address fairly complex holdings and complex family issues including the care of my disabled brother. I'd hate to have him waiting a year or so for my estate to clear probate.

 

[easysurfer]

Probably simplified, but my view is pay now (trust) or pay later (will).

Also depends on how much control you want when you are gone. If you want more control, then trust. If you have the perspective of "I'm gone anyhow ... like the living figure things out", then will.

 

[easysurfer]

... I went to a couple of Trust seminars. Didn't get any steak though - only store-bought cookies.

There's the scam right there .

 

[harllee]

One reason to avoid probate is to avoid probate fees that have to be paid to the court. Not sure what the probate fees are in Virginia but here in NC the maximum probate fee is $6000 no matter the size of the estate.

 

[livingalmostlarge]

We had a simple will when we had children 12 years ago. Nothing fancy to set up mostly guardianship and wishes.

This past spring we set up an irrevocable trust and pop up testamentary trust for our children. Our situation changed and we paid like $10k for what we have. It will have to change if we move to be state appropriate.

I told my mom not to do bother paying for a trust. And I don't think it's worth it. DH was the executor of his uncle's estate because there were no other relatives who could do it as a US citizen. It was CA and without a trust it was a pain. But his estate went all to charity and wasn't worth a trust only like $3m

 

[pb4uski]

Irrevocable Trusts still can have value, if one's goal is to protect assets, which of course is different from the probate concept.

"protect assets" from whom or what?

 

[Iggysmom]

My experience has been as the beneficiary of a trust and a will. Part of my parents' estate was in a trust, and the remaining assets were outside of that trust. After my parents died, we children received the assets held in the trust fairly quickly - it took about two months and no lawyers were required. To wrap up the rest of the estate required using a probate attorney and going through probate (court procedure) before the assets were distributed. That process took well over a year. Part of the reason for the delay was that some assets (notably, a house) needed to be sold and accounted for, but another part was that anything that involves courts takes a long time these days.

 

[rodi]

All of this is state dependent. Probate fees vary by state. My father's estate was in a trust - and assets transferred to his heirs fairly quickly. A friend's parents estate was handled with a will and it took quite a while - even after the home sold. Two anecdotal data points - but I've heard other stories along the same lines - will's take longer to settle than trusts. At least in California.

That said - if most of the assets can be titled POD (payable on death) then a trust is probably not needed. My aunt has her 'estate' (it's not a lot) set up that way... Each of her children get a different asset POD.

But not every state allows transfer on death for real estate. California is fairly new to allowing this.

I just looked up the probate fees in CA.. Filing is $435, and every action after that seems to be another $435-800 fee. Then there's the chunk taken out of the estate. 4% of the first $100k, 3% of the next $100k, 2% of the next $800k, and 1% of the next $9M. So an estate of $1M would cost $23k plus misc fees. Seems like a trust is cheaper.

We have a trust - but we also have kids who aren't fully launched (college) and wanted to make sure they wouldn't get a huge, life changing amount of money before their brains are fully functional. (It pays out in stages starting at age 25, while covering their expenses in the meantime. ) If we were to be hit by a bus tomorrow, I would not want them getting their inheritance all at once at ages 19 and 21...

 

[audreyh1]

I believe that it’s possible to avoid probate on most assets in most states and trusts are not required. Beneficiaries and transfer on death or jointly titled assets can take care of most of it.

I went through probate in GA for DF’s estate and it only took a month, and only involved his real property which could not be transferred via POD. All the investable assets were set up with beneficiaries or rights of survivorship and this transferred quickly.

 

[gromit]

If you TOD your financial accounts then how is the funeral paid for? I'm assuming there isn't a surviving spouse. Do you not TOD one account and have the will specify to pay for it?

 

[Cobra9777]

Texas allows TOD on both real estate and motor vehicles. You can specify multiple beneficiaries on the real estate but, for some reason, only one on vehicles. All of our financial assets have TOD/POD/beneficiaries. We also have wills as a backup, but they will probably never be needed for anything. I don't see much point in trusts unless you have a complicated family situation or large/complicated assets that can't be titled with TOD beneficiaries.

I get mailers every week from two or three local estate attorneys inviting me for a sales pitch over dinner. I certainly wouldn't use the word "scam", but I think trusts are probably sold to lots of people who don't really need them.