What is Guardianship vs Probate?

BARRY: Guardianship is kind of the same thing, except it’s for lifetime issues where situations where someone lacks capacity. If you lack capacity, that means–

CHAD: So just to clarify for everyone, Barry, this isn’t guardianship for children like people usually think of, right? This could be about your own capacity.

BARRY: That’s a good question, because it’s actually both. Technically, minors don’t have legal capacity. So, if you’re inheriting — this is a great question. If you have a minor child inheriting more than $15,000, you have to open a guardianship. You have to open a guardianship for them to legally take possession of it.

CHAD: I see this mistake all the time with life insurance. One spouse names the other spouse as the primary beneficiary, and then names a minor child as the contingent beneficiary. Obviously, children can’t inherit large sums of money, let alone $15,000.

BARRY: Now, that’s not fatal. It’s more of an administrative burden to get that result. But the real issue is control. They get control of that money at an early age. When they turn 21, they get full control of that money and can take it all to Vegas and put it all on black. If you’re okay with that, fine, but most people aren’t. So guardianship applies to minor children, but also to adults who lack capacity — Alzheimer’s, dementia, situations where someone can no longer care for themselves. Someone has to be appointed as their guardian, and a circuit court judge will decide for you unless you decide for yourself. That process is not quick. It’s not painless. It’s public. It’s a bit humiliating. And it’s really to be avoided. I don’t see any reason except in very few circumstances to intentionally go for the guardianship.

CHAD: Not to backtrack, Barry, but going back to number one for a moment, one of the big issues of going through probate is that it makes everything public as well, right?

BARRY: Yes, technically it’s public record. It’s not always easy to access, but yes, it’s public. So if you want privacy, that alone should tip the scale into you putting it into a trust, which is private. Good point. So, probate and guardianship. We’ve covered them briefly. They’re time-consuming, expensive, and I think it’s important to talk about what that cost actually looks like.

CHAD: I agree. Especially since we talked about how these processes can drag on for an extended period of time. You can have your attorney for over a year. Can you explain how attorney fees usually work in probate?

BARRY: Sure. There are a lot of ways that attorneys charge for probate. I would say there’s four common fee structures: hourly, flat fee, percentage, or some combination. We do all of them. It just depends on circumstances. For example, with a $50,000 estate, we’re not going to take a percentage. It’s just not going to be worth it to us. With a $100 million estate, we’re probably also not taking a percentage because that’s not fair to the estate. It just has to make sense. There’s a lot of work. There’s a lot of unpredictable things. But I would say as a general rule of thumb, $10,000 to $20,000, depending on complexity. $50,000 if it’s complex. If it gets litigated, there’s really no ceiling. That’s a lot of money, and all of it can be avoided. Financially it’s unpleasant, but also emotionally, psychologically, and “familially.”

CHAD: Speaking of family, I imagine it could cause issues, say, if one child potentially has money and the other one doesn’t and they’re contesting something in probate. I can imagine that could affect the outcome.

BARRY: Only because I want to make sure we talk about it. I think that’s later, but let’s talk about it.

CHAD: I didn’t mean to jumb ahead.

BARRY: Not that’s fine. If you have a situation where it’s at all questionable in terms of their capacity or someone has a close relationship with someone else and they’re always together, and that person just happens to be the beneficiary — or disproportionately the beneficiary. This happens all the time: someone gets older, they’re in their 80s, they have health problems, and they have three kids — the good, bad, and the medium one. The good child takes care of them, drives them to appointments, helps with medication, checks in regularly, they’re involved in your life. The bad one, they don’t give a shit about you. They can’t wait for you to die. They just want your money. They don’t call you, don’t visit, nothing. And then there’s the medium one that’s somewhere in between. And so you go to the attorney and say, “Look, the good one, they’re wonderful. They take care of me. I’m so grateful for that. I want them to get more. I want the middle one — there’s still hope for them — I want the medium one to get some. I don’t want the bad one to get anything.”

And say that this person has medical issues. Say there’s even a glimpse of lack of capacity. Say there’s facts that support that the good one was taking them to the attorney, involved in the process. All of a sudden, you have a very convenient opportunity for the bad kid to challenge the estate planning. Saying, “Wait a second, you didn’t have capacity to do that. Or, alternatively, you didn’t know what you were doing. Good kid took advantage of you to get a better deal. You didn’t really want to do that. They made you do it. This kind of scenario happens all the time. And unfortunately, there’s a lot of lawyers willing to take those cases because that’s what they’re supposed to do. They believe one side, and there’s always three sides to every story. They’ll paint a story, and often the case settles in a way that would make the parent furious. It’s very sad to see, but it happens. That’s why, as a firm, we anticipate these issues. We get to know the client and we try to preempt those types of arguments by strengthening the file to prevent and mitigate those types of contests.

CHAD: While we’re on the topic, as a follow-up — what are some of the things you do to strengthen a file like that?

BARRY: You’re asking me for our proprietary intellectual property here.

CHAD: We’ll save it for another time.

BARRY: Let’s just say that once you’ve done this enough times, you see how they’re going to be attacked, and you know how to fortify what you’re doing. You can’t eliminate the prospect that someone’s going to hire a lawyer and go for some hail marys, but you can maximize the likelihood that you’ll succeed at what you do. We don’t guarantee anything, but we do our best to fortify our plan. There’s a lot of things, but they wouldn’t make sense. So that’s probate and guardianship.