What is Probate?
A law student, upon embarking on his “Wills and Estates” class, asked me, “Why do I need a will if I could just go to probate?”
Good question, which gets to the heart of effective estate planning. To answer, I’d like to break the question down into two separate questions:
1. What is “probate” within the context of effective estate planning?
“Probate” addresses the two facts of life. Benjamin Franklin said these were “death and taxes.” My twist on this is “death (everyone dies eventually)”, and “property” (everyone owns something). When someone dies, who has the right to that person’s property?
Effective estate planning lets a person decide who will have the right to his or her property when he or she dies. In Colorado, there are four basic methods of effective estate planning:
a. Joint tenancy titling (most commonly for real estate between spouses or partners);
b. Beneficiary designations (for qualified plans such as 401s and IRAs, also for life insurance and annuities);
c. Through an inter vivos trust; and
d. Through a will, which is then subject to the probate process.
The first three processes are outside of the jurisdiction of any probate if done properly. Any property that does not pass by the first three processes is then subject to the common law judicial probate process (except for the civil jurisdictions of the state of Louisiana and the province of Quebec) through the judicial district in the state or province either where the decedent resided at the time of death, or where real estate is located that the decedent owned at date of death.
Probate varies widely between states and provinces. In some states and provinces (e.g. California), the time and expense of probate is such that estate planners in these jurisdictions advise clients to use non-probate methods described above, especially inter vivos trusts, to avoid probate. In others, such as Colorado, informal and unsupervised probate is readily available, so probate avoidance should not be the primary concern.
2. Should a client have a will for probate, or should the client allow the laws of intestacy to distribute his or her assets in probate?
We almost always advise clients to have wills for probate assets for the simple fact that it allows the client to clearly state who or what organization should inherit his or her assets instead of leaving the decision to the “one size fits all” distribution hierarchy of intestate succession.
When a decedent’s assets are subject to probate and the decedent did not leave a valid, legally enforceable testamentary writing (i.e. a will), the decedent has died “intestate.” Every state and province then has statutory “laws of intestacy” that dictate who has the right to the decedent’s estate. Intestate distribution almost never leaves any heirs happy, especially, for example, in second marriages with children from the first marriage.
A non-profit organization can never inherit under intestacy, because if no distant relative of the decent, even out to the nth degree, can be found on the face of the planet, the estate will escheat to “the King” (i.e. the state or province of the decedent’s residence).
Finally, if the decedent had minor or young adult children, intestate succession is less than ideal, because a conservator will need to be appointed for any property passing to a minor, and at majority (age 18 in Colorado) the child has unfettered and unsupervised access to the assets. Most of my clients’ 18 to 25 year-olds could not handle it. Effective estate planning will in this context utilizes a will with testamentary trust for minor or young adult children.