You Can’t Take It with You, But…

If you have a will—or don’t have a will—your estate must be probated. Probate is a court process where your assets are gathered, bills are paid, and the residue is distributed to your heirs. It can take anywhere from 6-18 months for an average case, partly because Rhode Island has 39 part-time probate judges. For example, Tiverton probate court is in session only one day a month.

Few people can navigate the probate labyrinth without the aid of a lawyer. Most grieving heirs use the lawyer who drafted the deceased’s will, or if there was no will, they use their cousin’s mother-in-law’s neighbor’s lawyer.

So what does probate cost? Let me use numbers from a real case that recently crossed my desk. Joe died leaving an estate of about $130,000 in cash and securities, a stamp collection, and a jewelry collection. He left the jewelry to his niece and the stamps to his nephew (Joe had no children). After the bills were paid, the rest was to go to two charities. A year after his death, the final bill was submitted. His personal bills added up to about $4,700, which was close to the amount in his checking account. But the fees attributed to the probate were:

The probate costs could have been avoided.

• The fee (inventory tax) to probate an estate in RI is equal to 1% of the value of the deceased’s personal property at death up to a maximum of $1,504. Joe’s personal belongings didn’t add up to much except for those collections, which turned out to be pretty valuable. Because there is no gift tax in Rhode Island, he should have given those away before he passed.

• It is hard to imagine what “unforeseen expenses” will arise a year after Joe’s death. Part of the probate process is publication of the personal representative’s name so that creditors know to whom to send the bill. (Cost $76.) Then creditors have 6 months to present their claims. Creditors may petition the court to file after 6 months as long as the estate has not been distributed. This money will eventually be given to the heirs, but probably after the attorney has deducted additional fees.

• The executor here was a professional rather than a friend or family member. Joe’s will says the executor is entitled to “a reasonable fee.” The executor had to hire someone to clean out Joe’s apartment, make sure the niece and nephew got the collections, write 13 checks, and make a couple of court appearances. What do you think is a reasonable fee? If the attorney, who also drafted the will, had suggested that Joe name someone from the church to which he was leaving half the money, I bet the executor’s fee would have been substantially less.

• Included in the attorney’s fee are the court costs, but even if those were $500, the attorney would have had to put in 30-45 hours to justify that fee. (Little secret: paralegals do most of the mundane probate work.) A revocable (also known as a living) trust would have avoided the need for an attorney to open a probate. It might have avoided the need for an attorney altogether.

A revocable, or living, trust can avoid probate. You establish the trust during your lifetime, title your assets into the trust and make it the beneficiary of your life insurance (consult an attorney before you make a revocable trust the beneficiary of your qualified retirement accounts), and at your death, a successor trustee steps in and pays your final bills and taxes and distributes the residue to your heirs. No public list of your assets. No long waits for a court date. No judge’s approval to sell your house or distribute the residue. Most successor trustees can do it without the aid of an attorney, and for a lesser cost.

Yes, a revocable trust costs a bit more to establish than a will—now, but in the long run it costs thousands of dollars less than probate.

Zona Douthit devotes her law practice to estate planning for middle-class families. Visit her website www.zdtrustlaw.com or call 401-305-8094 for more information.