Most estate plans include a last will and testament (often just referred to as a “will”), general durable power of attorney, health care power of attorney and health care directive to physicians (also known as a living will). Trusts are extremely powerful and also flexible agreements that are also often used in estate planning. Common estate planning trusts include testamentary trusts (created when you pass away under the terms of the will), living trusts (created by you while you are still alive) and special purpose trusts that carry out a particular function (such as irrevocable living insurance trusts, also known as “ILITs”, that are intended just to hold life insurance policies). In some states (including Washington) community property agreements are also commonly used.
Probate
Before discussing what most lay people regard as the foundational estate plan document (the will), it is worthwhile to discuss the probate process. Probate is the judicially supervised process of administering your affairs and assets after you pass away. It includes marshaling your assets, ascertaining and paying your debts and finally distributing your assets. The process is necessitated by the fact that after you have passed away we need some means of transferring title to the assets that you owned. Since you are no longer available to transfer assets yourself, the court will order that someone can act in your place (your “personal representative,” also called your “executor”).
Because of the time, expense and public nature of probate, many people will desire an estate plan that will avoid the probate process.
Intestacy
Intestacy simply means dying without a will or other legal estate plan document that directs distribution of your assets. A person dying without a will is “intestate”. Each state has laws that direct the distribution of an intestate estate. For example, in Washington if you are married and all of your property is community property your surviving spouse will receive all of the property. However, if you are single your parents would receive the property and if your parents do not survive you then your brothers and sisters would receive it, unless you are single and have children, in which case your children would receive the property.
As you can imagine there are many alternatives as to where your property will go in the event you are intestate. Applicable statutes are simply the legislative best-guess at what most people would want in any given situation.
When someone dies intestate probate is not avoided. As mentioned above, the crux of probate is transferring title to assets. The same issue exists without respect to someone that is intestate. The only difference is that the law, instead of your will, determines where your property is going to go. A court must still specify a personal representative (technically an “administrator” in an intestate probate) who will then have the court’s authority to transfer assets according to the statutory scheme.
Last Will and Testament
A will is a legal document that usually includes the following: (a) a description of your family members; (b) direction as to who will benefit from your estate; (c) limitations on how the beneficiaries will receive distributions (such as trusts for minor children, etc.) (d) nomination of your personal representative; and (e) nomination of your guardian if you have minor children. One significant advantage to a will over intestacy is the opportunity to make these determinations rather than accept decisions made by the legislature and courts.
The formalities that must be adhered to in preparing and executing a will are dictated by the laws of the state you reside in when you prepare the will. For example, in some states you might need two people witness the will, while in others you must have three witnesses.
Contrary to common belief, a will does not avoid probate. As stated above, probate is largely about transferring title to assets. While a will does give you the opportunity to state who will receive assets, under what circumstances and who will make the transfers for you, a court must still enter an order in a probate proceeding affirming that the person you nominated as your personal representative has legal authority to transfer assets.
Alternatives to Probate
As discussed, probate is often necessitated by the fact that we need a mechanism for transferring title to assets upon a person’s death. There are several other mechanisms that serve as probate alternatives. Each of these provides for a transfer of assets upon death by some means outside of intestacy or a will. These mechanisms include community property agreements, titling assets as joint tenancy with right of survivorship and using a revocable living trust
