Myths and Facts Regarding Probate and Trusts

Myth: Probate costs and attorney fees are usually as high as 10% of your estate.

Fact: Arizona court costs to open a probate are very modest. In addition, Arizona lawyers may charge only reasonable fees for necessary services, not percentage fees. Fees may increase in the event of tax issues, disputed creditor claims, or other litigation, but these same issues can arise with a trust.

Myth: In probate, assets are not distributed for several years.

Fact: An informal probate procedure can start as early as five days after death, and distribution can occur as soon as it is clear there are sufficient assets to pay expenses, creditors and taxes. Creditors have up to four months to submit claims and the personal representative may, but need not, delay distribution until the end of the creditors’ claim period. A trustee may also have to delay distribution to pay taxes or divide property. An improperly prepared trust may require money and time to correct before distribution can be carried out.

Myth: Probate forces the liquidation of your assets.

Fact: Liquidating assets is necessary only to pay expenses, creditors, taxes, or to make distributions to beneficiaries. Assets may be transferred in kind.

Myth: Probate litigation is more expensive than trust litigation.

Fact: Unhappy family members or beneficiaries can challenge both wills and trusts. A trust is not a guarantee against litigation. Expenses will depend on the nature of the litigation. Call me if you foresee future litigation concerning your estate.

Myth: A trust will avoid federal estate taxes.

Fact: A will or trust that provides for a “credit shelter trust” arrangement can reduce estate taxes for married couples who have combined assets over the federal estate tax exemption ($10,860,000). A trust in and of itself does not reduce estate taxes at an individual’s death, nor does a will.

Myth: Probate proceedings are complex and require special court approval.

Fact: In Arizona, most estates use informal probate procedures that do not require formal court approval. In most cases, personal appearance in court is not required.

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