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Living Probate? What is that?


We’re often asked “What is living probate?”

Too many people regard estate planning as little more than an after-death distribution plan for their assets. Whether they choose to transfer their wealth through probate with a will or avoid probate by other means, they believe that wealth transfer is all there is to estate planning. This is a big mistake.

The reality is that every 18-year-old has an “estate,” even if he or she does not have two dimes to rub together. Their estate is in their shoes. Upon reaching adulthood, each one of us is responsible for making our own personal, health care, and financial decisions. Even if our station in life is rather simple at any given time, these day-to-day decisions must be made. For example, were “incapacity” a legal justification for not filing a tax return, then there would be a surge in the number of incapacitated people around mid-April each year!

If a newly-minted adult child is incapacitated due to a serious car crash or illness, her parents (who are paying for her college and her health insurance, after all) can automatically decide where she will recover, make her health care decisions and even file her tax return from summer employment, right? Wrong.

What about married couples? What if a husband suffers a severe stroke and is in a coma. Certainly, his wife of 50 years can step right in and make all his personal, health care, and financial decisions, right? Again, wrong.

But I Have a Will …

Many people mistakenly believe that if they have a will, then that is all they need. In reality, their will only has legal authority when the maker of the will has died, and the will has been delivered to the probate court. In other words, your will is of no legal benefit to you while living. This includes the situation where you become incapacitated due to an injury or illness. Consequently, in the absence of proper legal planning for incapacity, you will be subject to the legal system’s default probate process designed for just purposes.

Living Probate

Perhaps you have heard the words “guardian” and “conservator” tossed around. Some states use the terms “guardian” and “conservator” interchangeably. However, other states have specific definitions for each term. A state may define “guardian” as the individual who makes personal and health care decisions for an incapacitated person, while a “conservator” makes financially-related decisions. Semantics aside, the default process is best avoided.

Regardless of what your state calls the process, it will be a hassle that is expensive and will expose your personal and financial information to the public. After the judge, who likely does not know you, appoints someone of her own choosing to make your personal, health care, and financial decisions, that appointed person will be under the ongoing supervision of the judge. Do you really want to subject your loved ones and yourself to this?

The Cure

Fortunately, the cure for living probate is readily available. For starters, everyone age 18 and older needs to have an advance health care directive for personal and health care decisions, along with a general durable power of attorney for financial decisions. These documents may be known by different names, depending on the state, but they should be attorney-prepared to comply with state law. Online versions tend to be generic and likely would not work as intended. For those with more complex financial assets, especially real estate in multiple states, then a revocable living trust can be an excellent approach to asset management in the event of incapacity.

This has been a general overview of a rather complex subject.

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