Join Michael Bailey as he demystifies the often misunderstood legal process of probate, providing insights on why it might be something to avoid. Through real-life scenarios and explanations, he delves into the intricacies of informal probate and offers a clear understanding of how wills and trusts function to safeguard your legacy. Whether you are new to estate planning or looking to refine your current strategies, this episode provides a comprehensive guide to ensure your wishes are honored seamlessly. Michael explores the probate process deeply, highlighting its impact on estate transmission to heirs. Through engaging conversations, he sheds light on
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.
SPEAKER 02 :
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. Phone number to talk to me on the air is 303-477-5600. And once again, that’s 303-477-5600. And my direct line is 720-394-6887. Once again, that’s 720-394-6887. So my intro always talks about how I can give you the information to avoid probate. And the question becomes, why do we want to avoid probate? What is probate? Why do we care if we avoid probate? What is it about probate that’s so frightening? And I I’m not sure the 100% perfect answer to all of those. So what is it about probate that’s so frightening? I think it’s a scary word. It’s like, it’s probate. You know, probate. Oh, we have to go to probate. We might be in probate court. Ooh, well, there’s a probate that needs to open. Ooh, be careful about the probate. Oh my gosh, there’s a probate. Ooh. Now, maybe it has to do more with the word probate itself, because you have probate. Well, if you’re on probation or if you have a job and you end up on probation, well, then something went wrong. You’re kind of On the you’re like, yeah, we’re not sure about you. We’ll put you on probation to see if we can figure that out. Or if you’re convicted of a crime and you get released, you’re on parole. Or, you know, maybe you’re if you happen to be. you’re accused of a crime and you have a plea deal and you’re like, okay, well, I’ll be put on probation. And so you’re like, well, if I don’t do anything, and we did that a lot when I worked for the drug court, we’d give people and we’d offer probation. So if somebody got arrested with a, when I worked for the drug court, people got arrested and they had some illegal drugs on them. and especially if it was their first offense, we’d be like, okay, we’ll put you on probation, which means for the next two years we’re going to require you to go to treatment and we’re going to require you to take drug tests and be clean for a couple of years. And if you can be clean, then we will go ahead and we will have your – so we’ve got – If you are clean for the two years and we will drop all charges, pretend like it never happened, and we’ll send you on your way so you’re on probation. And that was a lot because it was much more efficient and a better idea to help people who were using and addicted to drugs to become clean and become not addicted. than it was to punish them harshly and send them off to prison. So at least that was the approach that the drug court that I worked for took. I didn’t make that policy. I just was part of carrying it out. So whether or not we want, I mean, we could have a conversation about whether or not that’s the best policy. But when people think, you know, they hear the word probate and they, you know, maybe they associate it with probation or, ooh, there’s something terrible, horrible happening or, oh my gosh, you’re in trouble. Well, they’re not the same word. You know, probate is the legal process of getting assets from the deceased individuals to the named beneficiaries of the heirs. Now, probate can take many different forms. If you have a will, then you can usually do informal probate, which is where you apply to the court for probate and the probate court approves. We’ll give you what’s called a letter testamentary or a letter of administration in return. And a letter testamentary or a letter of administration gives you, as the named personal representative of the estate, or in other words, they call them an executor or an executrix of the estate, gives that person power to transfer assets out of your name and give them to the named beneficiaries of the heirs. So if my parents were to die and I’m the named personal representative, I could take their will to the probate court and say, okay, they’ve passed away. Here’s the application for probate. Here’s death certificate. You know, I’m in charge. So then the court says, okay, here you go, Michael. You now have the ability to act on behalf of your parents to gather those assets and get them to the right people. So I would go to their bank and I would claim the money in the bank. And I would go to their, the company that holds their IRAs, their 401ks and say, well, they’ve passed away. Now I need to fill out the forms that would allow payments to the beneficiaries. And then I would go to I would take probably take their house and I would sell their house because as rich as me and my three siblings are not, we can’t just hold on to a house as much as we’d like to hold on to the childhood home that we had when we grew up. And so we would take that. So I would have legal authority to transfer all of those assets. And because there is a will and it’s an informal probate, I have to check in with the court every once in a while. I would have to say, hey, here’s the assets. They’d be like, okay, here’s the debts that my parents have, if they have any. Okay, well, that’s good. And we pay those off. All right, so here’s what’s left over. Here were the assets. Here’s what we paid. Here’s what’s left over. So we have a final accounting and we’d like to just go ahead and split it up between the named beneficiaries who would be me and my three siblings. We go, okay, cool. Great. Awesome. So we can do that. So that’s, it’s a fairly informal process. You check in with the court every once in a while. just to make sure things are going the way they’re supposed to go. But informal probate, at least in Colorado, really isn’t that bad. You can find the forms to handle probate online. They’re the Colorado JDF forms. And I don’t know if it actually stands for a judicial department form, but I always think of it that way. JDF, judicial department form. So you can go find the forms. There’s a form. JDF 906 is instructions for probate with a will. So we go, okay, we’ll have instructions for probate with a will. Cool. We can do that. Sweet. Um, And so you’ve got – you just follow the instructions. Cool. Now, there are things you need to do to go through the probate process. There are steps to take, and I get that. But people also may be a little bit more afraid of probate because they think of probate being like a very formal – like it’s a whole – court trial where you have to go in and bring in the will and say, well, this is his, you know, have a handwriting expert that testifies about handwriting and that it was, in fact, the person who was writing. And, you know, you bring in the notary to say, yep, those signatures matched and I was there. And you bring in the witnesses to say, yep, we witnessed this person signing it or with this person, you know, handling it. And so you have a whole process of everything being that you say, well, okay, now we hit all of those benchmarks. So now we’re going to have this probate judge decide what’s supposed to happen with the assets. Well, the probate, a judge in a probate court deciding what happens with the assets is so incredibly rare. It really doesn’t happen because if you have a will, the will dictates what’s going to happen. It says, okay, this is what happens. This is who gets what. Sometimes there’s disputes over who was promised one thing and was there one will that forgot a child, or there’s something that was ambiguous as it was written, or I’ve seen wills that contradict themselves, things like that. They happen. And so you resolve those disputes in the probate court. But even if you don’t have a will, the state of Colorado has a whole intestate statute, and intestate means to die without a will, that will dictate what happens to your assets when you die. So it’s not necessarily the probate judge, but it’s the the Colorado statutes that say what’s supposed to happen if you don’t have a will. So you are listening to Mobile Estate Planning with Michael Bailey here on 560 KLZ AM or 100.7 FM. Also heard on 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 one more time, that’s 720-394-6887. Okay. So the Colorado intestate statute talks about what’s going to happen to your assets and what would be in the absence of a will, in the absence of a trust, what happens to your assets. And if you print out the Colorado intestate statute, it’s about 87 pages long. And you have to go through, okay, well, we’re both kids. So if you have a husband or a wife that dies, like, well, did they have kids? Yes. Okay. Are those kids kids of both spouses? Yes. Okay. Well, that makes it easier. It goes to the other spouse. Are they kids of different spouses? Because not everybody has a successful first marriage. And many people have a second marriage or a third marriage or subsequent marriages. And oftentimes they will have different children or, you know, a person may have a child with one person and then they have a second child with a different person. And so if the children are not the same children, or if the children are not all children of both spouses, then there’s a split. And you say, okay, well, a certain amount goes to the spouse and a certain amount goes to the kids. And you’ve got to split it up and figure that out. And then if there’s not kids, then there’s a whole thing of do we look up and out and do we try to give it to closest living relatives and things like that. I think of some of the movies like this movie Mr. Deeds where the guy is – well, I’ll tell my story in just a minute. For right now, we have Richard calling in. Hello, Richard. How are you?
SPEAKER 03 :
I’m doing good, sir. How are you?
SPEAKER 02 :
I’m well. What can I do for you?
SPEAKER 03 :
I’ve got a question. I’ve had some discussions within our family about setting up a living trust because we’ve got a couple of rental properties as well as family residence, and it’s a blended family where there’s step-parents and so forth. And I just want to know, is that advisable with a little bit more complex estate like that than just relying on a straight will?
SPEAKER 02 :
So it really depends on what you’re trying to accomplish. I mean, if you put things into a trust, then a trust is an alternative to a will. And the trust can dictate who gets what of those assets. So if you’ve got a blended family and you say, okay, well, we’ve got a house and a couple of rental properties. And those were mostly from one spouse or the other. But you want to split things differently between the various children that came from one spouse or another. You can certainly do that in a trust, and then a trust would avoid the – a trust is one of the ways to avoid the probate process. If you had certain kids who were better about managing rental properties or knew that they would be able to handle things – You could empower them to be in charge of the properties. And you can even say, well, if we don’t want to just sell the rental properties, we want to hold onto them and have them managed and have the, uh, the income from the rental properties split amongst the kids differently. Then you could hold those assets inside of the trust and, um, then control the, the trust would control those assets after, um, both spouses have passed away. Um, So that they could be used for kids from each spouse. If there’s a concern about if one of the spouses were to pass away and the other one would continue on and be able to, that other person would then be like, oh, well, you know, I’m going to give everything to my kids and I’m going to cut out the kids of the You know, the deceased spouse, if you put it in a trust, there are ways to set it up so that the surviving spouse can’t just cut off the kids from a marriage or from a previous marriage. So really a trust is a very good device to… Lay everything out so that both spouses have their wishes that can be carried out instead of, oh, well, one of us died. So now the other one gets to decide what to do with everything. Because if you have a will and one spouse dies and you leave everything to the other spouse, then the other spouse has complete control over those assets. and has the ability to then make whatever decisions they can, whether they want to give it to kids from both spouses, including the deceased one, or if they want to switch that around. So a trust can, depending on what is important to you, a trust can help enforce and carry out the wishes of both spouses so that we don’t have one making the unilateral decisions after the other one has passed away. So it really depends on what you’re trying to do.
SPEAKER 03 :
Okay. Just wanted to make sure it wasn’t an unnecessary complication.
SPEAKER 02 :
And not knowing enough about your situation, I can’t answer that question completely.
SPEAKER 03 :
Yeah, understood.
SPEAKER 02 :
I mean, if that’s something that you wanted to discuss more in depth, certainly give me a call on my 720-394-6887 number. And we could set up an appointment to sit down and talk more about your situation and what would make the most sense for you.
SPEAKER 03 :
Okay. Very good. Well, thank you, sir.
SPEAKER 02 :
You’re welcome.
SPEAKER 03 :
Enjoy your show.
SPEAKER 02 :
I will. Thank you. All right. It’s always fun when we get people who call in. Appreciate Richard calling in. But as I was saying, the movie Mr. Deeds, and I happen to have seen the Adam Sandler version of it where the billionaire dies and And he doesn’t have a will or anything like that, which, you know, people are like, oh, how could that possibly happen? I’m like, well, let’s talk about all the celebrities who that’s happened to. And so as you go through, you’re like, okay, well, you’re looking for the closest living relatives. And that happened to take place in New York. So whatever New York’s rules are probably slightly different than Colorado rules. These states’ rules are different. But there’s a scene where, and this is dating the movie, you know, the fax machine spits out who is the closest living relative. Well, first it spits out something that there’s a doctor telling somebody they have a spastic colon. And then it says that the closest living relative that the computer has been able to find is… a gentleman by the name of Longfellow Deeds. And Longfellow Deeds is not a billionaire. He does not have a media empire like his third or second or third great uncle or something like that had. He’s rather a guy who lives in a small town somewhere in the kind of New York, New England type of area. and, you know, lives a much more simple life than that of what a billionaire would. And so, you know, the whole movie is about, you know, the simpleton going to New York and not being quite as, you know, New York-esque as everybody else and things like that. But the actual mechanics of how is the computer, you know, this computer must be tapped into the genealogical records of all of these, you know, places and things like that. And, you know, can somehow track down who of all of these people. And I don’t know. I mean, there may be, there’s a computer program that can do that. I don’t know of it. But if that’s what you want to do, you want to leave it up to let’s go to our closest living relatives, that’s what the intestate statute says. Now, the other thing that I love with the genealogical records is because of the emphasis on family history and genealogy in our church, there’s a significant amount of records. And one of the cartoons that I’ve seen is Darth Vader sitting there at the computer going, Hmm. Luke has a sister. So for those who understand the Star Wars reference, oh my goodness, we’ve tracked it down. You think of the Jedis and the Jedi archives, you’d think they’d have had some sort of family history, genealogical records, but maybe they were destroyed when the Jedi temple was destroyed. So who knows? I don’t know. But if you want to leave it up to the state or the individuals to track people down, go for it. Sounds great. To me, I don’t know that I really want everything to go to my closest living relatives. I mean, my closest living relatives are my spouse and my kids. So I’ve created a will and a trust where I can I’ve written down that if I die, everything goes to my spouse. And when we both die, it will go to the three kids. And that just does that sound a whole lot simpler than 87 pages of trying to figure everything out. So that’s part of why we do it. Part of why we do estate planning is so that we’re not stuck with the default rules. We don’t want to be stuck with the default rules. Maybe we do. Maybe the default rules would give us exactly what we want. But do we really want to count on the default rules when… I don’t, I mean, I read the 87 pages once and I’m like, yeah, let’s just not do this. It’s part of why I do estate planning is because I don’t want people to be stuck with the default rules. So you are listening to KLZ 560 AM, also 100.7 FM. The KLZ 560 radio app, phone number to talk to me on the air is 303-477-5600. And once again, that’s 303-477-5600. And my direct line is 720-394-6887. And once again, that’s 720-394-6887. So probate is not necessarily a big scary thing. It’s doable in Colorado. Probate is not necessarily a whole court hearing and process and everything like that. It’s just not how things necessarily go. That’s just not… how probate needs to work. It doesn’t have to be this big, huge thing. It doesn’t have to be a big, huge, everybody’s, you’re going to have a court or a trial to determine who gets what. That’s just not quite how it goes. So because of that, probate may not be the scariest thing ever. But there are people who don’t want their wills to become public record, because when you re when you take a will to the probate court and become part of the public record, people can go find it. There are people who just don’t trust the government. Now, there are good reasons to not trust the government. There are some conspiracy theory reasons to not trust the government that might be of dubious truthfulness. But there are also, you know, sometimes avoiding probate and not wanting to go through the entire court process can make sense. You know, people are like, yeah, I don’t want to do that. So if you’re like, what are alternatives? Well, one alternative, like our gentleman Richard called, is a trust. So if you put your assets inside of a trust, a trust is an alternative to a will. And the trust, the idea of a trust is that you create the trust, and then the trust exists. Depending on the type of trust, it can either be a separate entity now, or it can be you know, partially you and partially a separate entity. And then when you pass away, the trust doesn’t die with you. The trust doesn’t get a death date. So because the trust doesn’t die with you, you have the ability to To have that, the trust continues on, it still exists. And so you can name somebody to be a successor trustee, your successor trustee, trustee is a person who’s in charge of a trust. So the successor trustee comes in and takes over the trust and can distribute things out. And because the trust already exists and continues to exist, the trustee can have legal authority and legal control over those assets. So you don’t necessarily have to have go through the probate process for the trustee to access those assets. And in doing so, you can avoid the probate process. Now, trust is not the only way to avoid the probate process. There are lots of assets that have beneficiary designations or pay on death designations. So like your IRA or your 401k will likely have a beneficiary designation. So your retirement accounts, if you put beneficiary designations on them, they transfer to whomever is named as the beneficiary. And that’s how that works. And that will happen outside of probate. It happens before anything you say in your will. So you put your beneficiary designations on your IRAs, 401ks, they can transfer. There is a, for investment accounts, you can have a beneficiary designation or a transfer on death designation. They’re very similar, if not the exact same thing. Bank account can have a pay on death designation. So you can designate all these things and where they’re supposed to go. And then even, and so for people who own houses, In real estate, there is such thing as a beneficiary’s deed. And a beneficiary’s deed is essentially a transfer on death deed. So you take that deed, you fill it out, you record it with the county, and then it says, hey, if I die, upon my death, ownership transfers to these people. Okay, cool. So it got transferred to those people. And so at that point, if you had a beneficiary deed on a house, then you would take that beneficiary deed and whoever is supposed to inherit the house can take a death certificate for the deceased person. to the county clerk and recorder’s office and say, hey, this person has died. And then the county clerk says, oh, well, if they’ve died, then ownership transfers to the named beneficiaries. All right, well, the named beneficiaries then either own the house or if they go to sell the house, then when they deal with the title company, title company will be like, well, wait a minute, this shows… You know, dad is the owner and the guest dad has died. Here’s the beneficiary’s deed. Here’s a death certificate. So we’re the we’re the kids. We’re the owners. OK, cool. And so they can transfer ownership of the house because the county keeps track of who owns the house and who owns the ground that the house is on. Because the county doesn’t want the problem of two or three people buying the same piece of property from each other from different sellers. And then they get together and they have to have a fight. And they’ll probably have a fight in court. It won’t be like quite the old west where you have a duel or something like that. So that’s an alternative to the probate process as well, is that you set up all those beneficiary designations. And depending on how many accounts you have, that can either be easy or simple. If you have one retirement account, one investment account, one bank account, and one house, you’re like, well, hey, I’ve only got four things to do. Well, what if you end up like I do, where I have a checking account, I have a savings account, I have a business checking account. I have a business savings account. My wife has a business checking account. She has a business savings account. Each of my kids has a savings account. And my oldest has a checking account. And my middle daughter is about to have another checking account. So that gives us 11 different bank accounts. Well, we’ve got 11 different bank accounts. We’ve got to put accounts on all of those. You’ve got to put beneficiary and pay on death designations on all of those. You know, let’s say that you invest in different places. You have an account at Charles Schwab and you have one at Fidelity and you have one at Robin Hood and you have one at E-Trade and you have a Charles Schwab. You have an investment account and you have an IRA or a 401k. You know, at some point you’re like, well, now I’m setting up these things on like 25, 30 different accounts. And if you’re okay with that, by all means, go for it. If you think that you’re like, well, I don’t want to miss one, or what if there’s a problem with this or something like that, then you can set it all up so that it all funnels to a trust and it’s all handled in one spot. And if you miss something, then it’s picked up by your will that dumps it into the trust. So there’s different ways to avoid probate. There’s reasons why you may want to. There’s reasons why you may not want to. but it’s one of those where you want to make an informed decision to make sure what you’re doing really is what you want to have happen. So thanks so much for listening to Mobile Estate Planning with Michael Bailey here on 560 KLZ AM, 100.7 FM. My phone number one more time, 720-394-6887. I’ll be back next week, but stay tuned for John Rush and Rush to Reason.
SPEAKER 01 :
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.
