The Shift from Estate Planning to Estate ProbatingThe Shift from Estate Planning to Estate Probating

Surveys confirm that avoiding probate is the primary reason that clients engage in estate planning today.  Yet, the estates of the majority of Americans will go into probate.

In March 2014, Trusts & Estates published the findings from the 7th Annual Industry Trends Survey conducted by WealthCounsel and WealthManagement.com.  The survey looked at the business challenges of estate-planning professionals and provided insight on what motivates clients to engage in planning.  The survey found that the top three reasons that clients engage in planning are to: (1) avoid probate (59 percent), (2) minimize discord among beneficiaries (57 percent), and (3) protect children from mismanaging their inheritances (39 percent).

Yet, in spite of the survey results indicating that probate avoidance is foremost in the mind of those who engage in planning, the bad news is that the majority of Americans don’t plan because they lack awareness as to why they should.  (See 4th Annual Industry Trends Survey.)

So it’s no wonder that many attorneys will be shifting their focus from estate planning to estate probating.

New Business Opportunity

More than 2.5 million people (comprised mostly of seniors) die each year in the U. S—a number that’s expected to increase dramatically over the next 10 to 20 years due to the aging baby boom population.  And, according to the U. S. Census Bureau, more people were 65 and over in 2010 than in any previous census.

Combine those figures with the estimated 55 percent to 70 percent of Americans who don’t have an estate plan or a simple will, and it becomes clear that large numbers of people will die intestate over the next 20 years.

While these sobering statistics present a challenge to the estate attorney’s current business model built around trust planning, the new reality is that it simultaneously presents a new business opportunity. 

As heirs are thrown into the fray-of-delay and endure complex probate proceedings, they’re presented with a “teachable moment.”  For many beneficiaries, the light bulb goes on, and they may vow to spare their own families the chaos and discord that often results from poor planning.

Estate attorneys, especially those practicing in states with large populations of seniors, such as California, Florida, Pennsylvania and New York, will have a strategic advantage in this new reality. While trust planning will never go away, attorneys need to be prepared if they intend to capture a share of the probate market.  Many estate-planning attorneys, especially solo-practitioners whose practices are focused on pre-death document drafting, may need to expand their skill sets or hire additional staff with a probate background and/or litigation expertise.  Much of what occurs during probate is administratively intensive, court-procedural and requires keeping up with state case law and statute.  Some small firms divide these areas of responsibility based on each attorney’s specialized expertise and even their comfort level as it relates to courtroom appearances. 

Ultimately, the probate vs. planning pendulum will shift back to planning, as more clients who were refugees from the probate process engage in proactive planning. 

Until more Americans make estate planning a priority, it stands to reason that, just as a rising tide lifts all ships, intestacy will become an even greater problem 10 to 20 years down the road. 

I hope that National Estate Planning Awareness Week (Oct. 20 to Oct. 26) will help bring this issue the visibility it deserves.