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All right. So why do people want to avoid probate? Well, first, a lot of people just want to avoid the time and expense of having to deal with the court. That’s probably a good reason right there. Anything that goes through probate, anytime you have to get a court involved, you’re always talking about additional time. The court itself makes a charge, so you’re saving some money from court. The other thing that’s a biggie is that the probate process does become a matter of public record. And this is important.
Now when I was a young lawyer, if you wanted to look up somebody who’d died, you had to go into this dusty room. I did it myself. And this dusty room had this very complicated index called the Rust Lander Index and really only law students, clerks, and attorneys knew how to use it. But you could basically look up what somebody put in their will, anybody who died in that particular county, and his/her assets that went through probate. Well now, a lot of that is online. And then again, it’s a matter of public record. So if you want, you can just check out what somebody had in their will after they died, but you might not want that, in which case you might prefer having a revocable trust control your assets as opposed to a will.
There are many executors that will charge a percentage of the probate estate as their fee. And by the way, I’ll tell you a quick story when I was working for—I don’t even want to mention the firm at this point.—but I was working for Arthur Andersen. I won’t mention the client, but the client was a big bank, and the big bank handled a lot of trusts and estates, and the big bank had problems. They understaffed the people who were preparing tax returns for their trusts and estates, and they needed people to come in and do the tax returns, and these aren’t typical tax returns. So, you can’t get a CPA off the street and say I want you to do these tax returns for these trusts and estates because they’re kind of specialized returns. And I was one of those guys who had that specialty.
Anyway, this big bank hired the Arthur Andersen team to go in and prepare trusts and tax returns for these trusts and estates. So, I was able to see, and to his credit, our partner said to this client, “Well we will do that, but we’re going to do Arthur Andersen quality, which means we’re going to read the trust, we’re going to read the will’s going to do the allocations, whether they’re supposed to, and we’re really going to do this right.”
Anyway, I saw the inside of what happens to money after people died, and I just saw huge fees going to banks and to attorneys as executors and attorneys of estates, typically based on a percentage of the estate. I won’t say that the work was done particularly well. And I would just say that if the work was done on a fair hourly basis, that the fee might have been tens or even hundreds of thousands of dollars lower, than they actually were when you had this big bank, and you had this attorney who, by the way, both charged a percentage of the estate. And I had two reactions when I saw these enormous attorney fees based on a percentage of the estate. My first thought was, “This is outrageous.” That’s how clients were getting ripped off. This should be done on an hourly basis. And then I thought, “I wonder if I can get in on that?” but I did not choose to go to the dark side. We always do estate administration on an hourly as opposed to a percentage basis. But by the way, that often doesn’t happen.
Speaking of executors and I would even say trustees, and by the way, there’s going to be a zillion banks and estate attorneys who are going to get mad at what I’m going to say and I always get some grief on this, but I feel strongly about it that when possible which is usually, I would have a strong bias in favor of naming the trusted family member as opposed to a bank, a CPA, or an attorney. I really like having a family member. Hopefully, somebody that you can trust, typically, one of your kids as opposed to a bank, a CPA, or an attorney.
They can always hire outside experts whether it’s an investment expert, whether it’s a CPA, whether it’s an attorney, and if they don’t like the services provided by that estate attorney, CPA, or investment person, they can fire them and choose somebody else. But you keep the power in the family.
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