Join Michael Bailey, the Mobile Estate Planner, as he delves into the complex world of probate and estate planning. In this episode, learn the importance of having a proper end-of-life plan and how avoiding probate isn’t always necessary. Michael highlights the common misconceptions about the probate process and provides insights into whether it’s the right option for you. Whether it’s a trust or a will, he helps unravel the pros and cons, guiding you to make informed decisions tailored to your unique situation.
Welcome to Mobile Estate Planning with your host, Michael Bailey. Over a decade ago, attorney Michael Bailey turned his attention to estate law after he recognized the unacceptable number of adults without proper end of life planning. Michael recognizes that many of his clients have difficulty finding the time for making a proper estate plan. That’s why he became the Mobile Estate Planner. He will go to wherever you are to assist you with your estate planning, including writing wills, trusts, and giving you the information you need to avoid probate. Now, ATX, Ask the Experts, presents Mobile Estate Planning with your host, Michael Bailey.
Michael Bailey (Host) :
Good afternoon. Welcome to Mobile Estate Planning with Michael Bailey here on 560 KLZ AM. Also heard on 100.7 FM or the KLZ 560 radio app. So many different ways. Phone number to talk to me on the air is 303-477-5600. And again, that’s 303-477-5600. And my direct line is 720-394-6887. Again, that’s 720-394-6887. So, I… I had planned to be here last week, you know, two weeks ago. I was like, hey, I’m totally going to be here. I’m totally going to make it right on time. And then I wasn’t working the rest of the day and life got in the way. And so I’m sure that Luke, were you here? Was that Charlie that was probably scrambling to get me out on the air?
Producer Luke (Host) :
Last week?
Michael Bailey (Host) :
Yes, last week.
Producer Luke (Host) :
Then that was Charlie scrambling. Okay. I was in sunny Los Angeles. Oh, nice.
Michael Bailey (Host) :
So it’s probably Charlie scrambling. So my apologies to Charlie for scrambling. He probably could pull up one of my shows and just run it. But I’m glad to be back now. So my intro says I can give you the information to avoid probate. And so the question becomes, is that something that we want to do or need to do? You know, people get concerned about probate and, you know, well, we need to, do we need to avoid probate? Do we need to, you know, what’s wrong with probate? What is probate? You know, all of those things go into it. And the answer is there’s not one right answer. Um, people get concerned about, uh, People get concerned about whether or not they’re like, oh, you know, we need to try to avoid probate. And I’m like, well, do we though? I don’t know that we – because avoiding probate sometimes is a goal that you want to do, but sometimes it doesn’t have to be. It’s not the only goal that’s involved because sometimes – because when you’re setting up your estate plan, probate isn’t necessarily the – Probate isn’t necessarily the enemy. Probate is simply the legal process of getting assets from the deceased individuals to the named beneficiaries or the heirs. But it’s not necessarily, it doesn’t have to be a liability. terrible, horrible thing. And there are some really good reasons why you may want to go through probate. And so the thing is that people sometimes misunderstand that if you have a will, people are like, oh, I have a will that I don’t have to go through probate. I’m like, well, actually you do because a will goes through the probate process. And the probate process is just the process of getting assets from the deceased individual to the named beneficiaries of the heirs. But that’s what happens with a will. Now, a will guides probate. A will says what is supposed to happen in probate and who’s supposed to get what. So that’s what we do. is we say, okay, we’ve got, you know, is the probate process say, okay, well, what does the will say? What are we supposed to do? Oh, we can do that. So that’s what, that’s what happens with the will is that you go through, is it, so that’s, you know, so we get probate with a will. Now, of course, the You know, there are many people who don’t want to go through probate, don’t like probate, don’t want to have anything to do with the government or have to have the government be involved at all. You know, they just they just they don’t really want to have anything to do with probate. And I’m like, okay, that’s fine. But if you’re trying to avoid probate, then often you have to use a different type of vehicle or different type of estate planning product than a will, whether you use a trust or you have a beneficiary’s deed or you have any number of other things And when you have that, when you’re trying to set things up, you can’t, you need to decide which way is the way to go. You know, a trust is an alternative to a will, and a trust becomes a private document so that your assets can pass through the trust instead of through the probate process. Now, lots of people say, well, which one’s better? Which ones do I need to do? And I’m like, well, it’s not that simple of a question because probate itself is just a process. It’s not a scary thing. It’s not a horrible thing. It’s not a big court hearing where you have to go and have attorneys and prove things and so on and so forth. It’s just kind of what it is. And And sometimes people, you know, sometimes probate is a really good idea for people. Sometimes it’s not. Sometimes people want to go through probate and sometimes they don’t. So, you know, why would you not want to go through probate? Well, you don’t want to deal with the government. You don’t want the government involved in things. You don’t want to deal with the courts. Those type of reasons come up fairly often. And so, you know, people don’t necessarily, I mean, nobody, okay. I have some friends who are litigation attorneys, and that’s what they do for a living is they go to court and they litigate things and they do trial work. And, you know, they may be the kind of people who enjoy going to court. Or… If you’re like the judge that I worked for, or I actually have a law school classmate who just got nominated to become a trial judge, and I have another law school classmate who’s a magistrate judge down in Douglas County, they’re judges, and so they go to court, and that’s what they do. And so they’re probably excited to go to court on a regular basis. Unless there’s reasons why they’re not excited. But most of the rest of us, myself included, even as an attorney, we tend to want to avoid going to court. The judge that I worked for, he seemed to enjoy what he did. And he called us in one day and he said, you know, guys, this is amazing. They pay me a lot of money. And I don’t do anything. I just kind of react to what other people do. This is great. This is cool. Cool. Sorry. I was just excited about that. Now you guys go back and do work so that I can sit here and do nothing. He was funny. He wasn’t, yeah, he does plenty. He did plenty of work. We’re not, it’s not like he was a slacker or something like that, but it was just kind of funny to hear him talk about that. Actually, later, after I’d worked for him, I worked for the DA’s office. And I quoted him. I had a very upset mother. I was working the juvenile court and had a very upset mother who was confronting me and screaming at me in the hallways of the courthouse about why I hated her son and so on and so forth. And I looked at her and I said, ma’am, I didn’t do anything. I just reacted to what your son did. So maybe you should talk to him. And I hope you have a great day. And I just kind of walked around her and went on my way. So it was a useful, helpful thing that the judge had taught me. But not everybody wants to go to court. So if you don’t want to go to court or you don’t want your heirs or your beneficiaries to have to go to court, after you’ve passed away, then a will may not be the way to go. You need to do something else, like have a trust. But trusts are more intense and more work on the front end to set up, and therefore they’re a little bit more expensive, because instead of putting the work off on your representative on the back end and making them do all the work, you’re doing the work on the front end to kind of make things easier for them. So it’s a matter of do we do the work on the front end or do we do the work on the back end? On the front end in a trust, okay, we can do that. Back end with a will, we can do that too. You just have to choose which one makes the most sense. And sometimes people will be like, oh, well, my kids can handle everything. They’re going to get the money, so we’ll make them do the work. So we’ll just do wills that they can do on the back end. Okay, cool. Sounds good. Other times people are like, well, you know, we have young kids, and if we turn this over to a brother or a sister, we don’t want them to have to do things, so we’re going to set up a trust to make it easier for them. And, you know, either approach is fine. It just depends on what you want to do. So you are listening to Mobile Estate Planning with Michael Bailey here on 560 KLZ AM, also heard on 100.7 FM or the KLZ 560 radio app. Um, but those who are trying to, and so when someone says, well, is it better? Is it worse? I’m like, it’s really dependent on your situation. So, you know, a trust is a private document and people wonder, well, you know, who’s going to make the trustee do what they’re supposed to do? And the correct answer is there’s not an active body out there that’s supervising a trust. They just, it doesn’t exist because the trustee A trust is a private document by very definition. Now, the beneficiaries of the trust, if they think the trustee is doing something wrong, they can petition the court to look into it or to have a trustee removed if they’re doing something wrong. But there’s not an active body out there supervising things. And so a trust… does have the ability and the possibility of lending itself to a trustee doing things in an improper manner and running amok. Now you can, you can put, uh, someone who’s like a trust protector who can come in and enforce the provisions of the trust. Um, you can put that into a trust or, uh, well, um, And so it’s just one of those things that you can have. So you can create somebody who’s actively monitoring things, but that’s not necessarily going to always be the case. And there’s not a government entity out there monitoring trust because that’s kind of the point of a trust is to try to keep the government out of it. So some people get very concerned about that and they’re like, oh, well, you know, we don’t want somebody to not have anybody looking over, you know, keeping track of things and making sure they’re doing things the right way. And that’s where having a will or having probate could be a really good thing, because when you have a will and it goes through the probate court in order to do things you have in probate, you have to have a. you have the court supervising things and the court is you have to so the personal representative who’s in charge of the will has to give an inventory of assets to the court and then once they’ve inventoried the assets then they have to give, you know, pay off creditors and give notice to unknown creditors, and they have to inform the beneficiaries of what they’re supposed to receive, and they have to give a final accounting of here’s what we, here’s what was in the estate, here’s what has been paid out, and now we’re ready to disperse things, and the court The court isn’t necessarily watching every step of the way. Well, it might be because there’s different levels of probate. But if you’re concerned that the person’s not going to be doing things the right way or there’s the possibility that somebody could do something untoward, then having the court be there supervising is a desirable thing. Now, there are different levels of probate. There’s informal probate, which is where the personal representative mostly acts independently and just checks in with the court every once in a while. There’s formal administration, which is exactly what it sounds like, much more formal. There’s much more interaction between the personal representative of the court. And then there’s court supervised administration. And court supervised administration usually is there because something has gone wrong. You know, informal is, okay, we’ll do this. We’ll do this right. We’re good. Formal is, hey, you know, we, there wasn’t a will or we were concerned about, you know, person X acting correctly as opposed to person Y. So we want formal administration, court supervised administration. A lot of times is, hey, you know what? The first personal representative tried to take the money and run. And then the second one got in a fistfight with the kids of the deceased. And the third one was, you know, thinking that this was kind of like it was Perry Mason and trying to do something. all this intrigue. So we’re just going to go ahead. This fourth person who’s involved, we’re going to be like, okay, you have to check in with the court. You need the court’s permission to do all of these things. You know, we need somebody really standing there looking over your shoulder, pretty much everything you do. So most people may not need court supervised administration. Most people don’t even need formal administration. They can be on the informal side, but the informal side is where people can, um, check in, um, so people can check in with the court and make sure they’re doing things the right way and not just be left to their own devices. So someone who has that particular set of circumstances where they’re like, yeah, we don’t 100% trust everybody, along the way, so we’re not sure that we really want to just let this person do anything and everything. So instead, we’d rather have somebody who can somebody who can have a, you know, just look over their shoulder, make sure they’re doing things. And if something starts to go off the correct path, be like, Hey, you know, you need to kind of, they can reign them in sooner than what might happen with the trust. You know, with a trustee, you’d say you have a trustee who’s in charge of a trust that has $3 million for three kids. So that’s what, so it would be for my kids because if I die, I’m insured for a couple million. My wife’s is insured for a million. So, if we die there’s three million in life insurance so each of the kids could be a millionaire you know the the problem there is that i and my wife are dead which you know there there are probably days that my kids would be like yeah i don’t know that i really want my parents i mean most teenagers probably feel like that every once in a while hopefully mine don’t feel like that all the time but still um so we uh so if there’s three a trustee has got three million dollars for three kids The trustee is like, OK, I’m going along. I’m using this money to take care of the kids. And then the trustee happens to fall on hard times. Maybe they get laid off and they’re out of work for two years and they’re still taking care of kids. And they’re like, well, wait a minute. I’ve been out of work for two years. Now I’m six months behind on my mortgage and I’m about to lose my house. And I have access to this three million dollars. And, you know, I can just kind of borrow twenty five thousand dollars and to make sure that I can stay in my house and I’ll pay the trust back. I promise, I’m sure of it. So then that $25,000, the trustee takes out and uses to pay their own expenses, which is not what they’re supposed to do, by the way, but it happens. There’s a temptation there. And the kids, if you’re taking care of younger kids, say the kids were eight, six, and three, and you’re like, well, the eight, six, and three-year-old aren’t going to know or care how much money is in their trust because they’re trusting the trustee. And so this trustee is like, oh, we’ll take $25,000 out there. Okay, cool. And then five years, they’re like, oh, I just haven’t been able to repay it. It’s been hard times. And then, oh, well, you know, now… now the, I had a new job and then I got laid off again. And now I only need 15,000 this time. Okay. So there’s $40,000. And then the kids get to college and they graduate and they’re like, cool. And then, Oh, Hey, here’s the rest of your money. And they’re going, wait a minute. I had a scholarship. I was frugal. So why am I only getting $60,000? Shouldn’t there be $600,000? And the trustee says, well, you know, just the trust didn’t do as well as we thought. And then so then the new college graduate starts to delve into things and says, wait a minute. You ended up taking a couple, two, three, $400,000 for yourself out of here that you weren’t supposed to do. So we need that money back. And the trustee says, well, wait a minute. You know, I just, I used it to pay for my house. What am I supposed to do? Sell my house so I can pay you back? And the kids say, yep. well, now you’re going to need to go to the court and have the court order that the house be sold so they can be paid back. But sometimes the house may not be what they spent it on. Say they went on a vacation to Hawaii and spent $20,000 on a Hawaiian vacation. Well, you can’t just go to Hawaii and say, hey, Hawaii, can I have $20,000 back? And Hawaii will be like, oh, sure. We have this magical money tree that grows in the middle of the volcano. So We’ll just pull $20,000 off and give it back to you. It doesn’t work that way. So there is a possibility with a trust that you could have improper acting. People are like, oh, they can’t do that. It’s illegal. I’m like, well, I’d like to believe what you say, but if you say you can’t do something because it’s illegal, let’s talk about some other illegal things. It’s illegal to speed. It’s illegal to turn left on a red arrow. It’s illegal to steal things. It’s illegal to steal soda when you didn’t buy a soda and just got a water cup. It’s illegal to steal somebody’s car. Technically, murder is illegal too, but people get killed all the time. So just because something is illegal doesn’t mean it can’t happen. It means it shouldn’t happen, but there is the possibility that it could happen. So as wonderful as trusts are, they are not a foolproof, everything is going to work out perfectly all the time method. So while a trust may be superior in a lot of respects, it’s not the perfect thing that could work in every single situation. So you have to think about it and pick what’s best for you. So you are listening to Mobile Estate Planning with Michael Bailey here on KLZ 560 AM or also heard on 100.7 FM or the KLZ 560 radio app. Phone number to talk to me on the air is 303-477-5600. And again, that’s 303-477-5600. And my direct line is 720-394-6887. And once again, that’s 720-394-6887. So you’ve got, and probate, a lot of times people will be like, they’re like, oh, well, do we need to go through probate? They’re like, well, let’s talk about probate. Probate is, at least in Colorado, probate isn’t that bad. You can find the forms that you need to file for probate online. The Colorado Judiciary publishes those. So there’s a form that you can fill out to apply for probate. And then there’s a form you can fill out to be for a letter of testamentary or a letter of administration, which is where the court gives you, gives the representative legal permission to access your assets and to get them and transfer them where they’re supposed to go. There’s a form for who’s going to be appointed as the personal representative. There’s a form for who can, you know, if there’s a couple of kids and one’s like, no, I don’t want to act as a personal representative, they can turn down that. So there’s just different, there’s different, so all the necessary forms to fill out complete and then take to the court to file, you can find them online. And I mean, I’ve had many clients who I’ve explained that to them and they can go find the forms and they fill them out and go through the process and they’re fine. Others are like, oh, well, you know, we were doing fine, but then suddenly we got a notice from Medicaid that they had paid $75,000 on my dad’s behalf, so we’re not quite sure what to do with that. I’m like, well, is there enough in the estate to pay it off? Well, yeah, okay, then just go ahead and pay it off and then move on. Well, no, there’s not enough, so what do we do? I’m like, well, you really want to talk to an attorney who handles… uh, probate administration, because one of the nice things about how things go in probate is that if there are more debts than there are assets in a state in an estate, then, uh, the excess debts can be dismissed through the probate process because, um, basically your debts kind of die with you, but they could be collected against your assets. So let’s say that you have a house and you’ve, You buy this house and you’re living in the house and it’s all good. And then you’re like, oh, well, you know, I need to refinance the house and we’re going to refinance the house to pay for medical bills or to pay for a car or something like that. So you’re like, OK, now we refinance the house and then we do live in Colorado and there’s going to be the problem of land subsiding. So let’s say that your house starts sinking. You’re like, oh, well, now the house is sinking. The foundation is starting to crack. It needs $100,000 worth of repairs. So now if you had a house, it was worth $500,000, but it needs $100,000 of repairs, so it’s only worth $400,000. And your loan balance is $450,000. So now you’re $50,000 upside down in your house. You go, ooh, this is a problem. What do I do now? Well, if you’re alive, you keep paying on it, and hopefully that will do that, and you can pay somebody to come in and hopefully kind of shore up your house and stop it from sinking and fix the foundation. There are construction companies who do things like that. I’m not one of them, but there are people who do that. And so we go, okay, well, we’ll try to do that. We’ll try to fix it. We’ll try to make sure that things are good. That’ll be good. And so let’s say that that happens to be the moment at which you happen to die. And you’re like, oh, so you die. House is worth only $400,000 because of the necessary repairs. You owe $450,000. Well, you go in and you’re like, okay, well, you sell the house. So you sell the house and you’re still $50,000 upside down. But through the probate process, you’re like, look, we’ve paid off all we can. There’s no more money left. Sorry, creditor. You’re not going to be able to recover that extra $50,000. And the creditor is going to have really no choice or recourse but say, No, but wait, isn’t there more assets? You’re like, well, let’s see here. Where there was the house, the car was worth $250 because it was a 1993 Honda Prelude that was still running with 580,000 miles on it, but just not worth anything. There wasn’t any money left in the bank account. The furniture and stuff was… vintage purchased in the fifties and not replaced since. So it’s good for taking out to the dump. So there’s, there’s nothing left and the cutter goes, oh, okay. Well, I guess there’s no, so they’re kind of out of luck at that point. Now, this is part of why creditors and lenders are very careful because they don’t want to be put in that situation. I mean, I’ve had many clients be like, well, when they die, how do we set it up so that the loan then just disappears? And I’m like, that would be great. That would be awesome if I could figure out how. that when you die, the loan just disappears and the house goes to your kids. That would be awesome. Could you imagine how rich I would be? I’m like, yes, I will put you in this loan. You’ll have all of this money. And then when you die, the house passes to your kids, but the loan just goes away. I don’t think that the banks and other lenders would be cool with that. What do you think, Luke? You’re cool with the banks and lenders just being like, yep, we’ll just forgive all loans forever?
Producer Luke (Host) :
Oh, they’re famously very generous like that.
Michael Bailey (Host) :
Yeah, in a not at all sort of way?
Producer Luke (Host) :
In a not at all sort of way.
Michael Bailey (Host) :
Right, exactly. At least we’re on the same page here, or at least the same, you know, set of microphones. But, you know, I mean, that would be great for, you know, kids and things like that. But that’s not how it works because banks tend to not, you know, make bad loans. And they tend to make loans where they’re going to make money and they’re going to recoup their money. So, you know, but if you had same situation, say the house is, you know, worth, $400,000, you owe $350,000. So okay, we got $50,000 of extra money. Sweet. Except that when the person dies, they had $75,000 in credit card debt. Well, that $75,000 in credit card debt is going to come and try to take what they can get of the other $50,000 in equity. But then the remaining $25,000 can be discharged in probate. So, again, there might be really good reasons to go through probate. Not everybody needs to avoid probate. If you want to avoid probate, there are ways to do it. And I’m certainly well versed in those. But we want to evaluate what your situation is like before we just go trying to say, yes, we need to avoid probate as a blanket statement. It doesn’t work. So thanks so much for listening to Mobile Estate Planning with Michael Bailey here on 560 KLZ AM. I will be back next week, but John Rush is coming up next, so stay tuned. Thanks and bye.
Intro (Host) :
Mobile Estate Planning with Michael Bailey will return to ATX next Wednesday at 2.30 here on KLZ 560, AM 560, FM 100.7, and online at klzradio.com.
