About Estate Planning
It is a common misconception that estate planning is important for only those with money or who are advanced in age.
This myth is a cruel deception. Everyone can benefit by creating an effective estate plan.
Arranging for the distribution of one’s wealth is what estate planning is all about. A critical part of estate planning is creating legal documents that outline your wishes for distributing your wealth after you die.
Every individual has an estate plan provided by the courts. If you do not have a formal written will or trust, your estate plan is created out of default. Every state in America has laws governing the distribution of property when a person dies without a Last Will and Testament (i.e., dies intestate). The question is not whether you will have an estate plan, but whether you will have an estate plan of your own selection or one imposed upon you by the courts.
Traditional estate planning involves creating a will. By preparing a will, most people believe they have effectively safeguarded their family’s inheritance. However, this is often a false “peace of mind.” A Last Will and Testament outlines your wishes about the distribution of your property after death, but testamentary documents such as wills usually require PROBATE. In preparing only a will, you may be forcing your loved ones through months, maybe even years, of agony in the probate court.
Probate is the orderly administration of your affairs supervised by the court. Probate is a function of state law and varies from state to state. If you own real property in more than one state, it is probable your estate will be subject to probate in numerous jurisdictions, each imposing their own probate fees.
Probate comes from the Latin word “to prove”. A will must be presented to the probate court and proven to be a valid document. In addition to “proving the will”, the probate process also includes:
- Officially confirming the personal representative named in the will or appointing a representative, if necessary.
- Notifying the court of a deceased person’s death and informing all involved parties (all potential heirs whether named in the will or not) that probate has started.
- Taking an inventory of all property and appraising its value.
- Paying the deceased person’s debts and taxes.
- Preparing a final accounting to the court.
- Distributing the remainder of the deceased’s property to the heirs.
- Closing the estate.
The Disadvantages of Probate
- Time Consuming: The probate process can take a few months or as long a several years to complete. The average probate takes about 15 months. In complex situations, probate lasting 18 months to three years is not unusual.
- Costly: Attorney’s fees to probate an estate can run into thousands of dollars. In addition, the executor, inheritance tax referee, and other officers of the court must be compensated. All related probate fees must be paid before any of the decedent’s assets are distributed to the family. The average cost of probate is 10% of the gross estate.
- Loss of Control: The probate court controls the entire process. Someone “on the outside” will tell your beneficiaries who gets what and when.
- Lack of Privacy: All probate transactions are a matter of public record. Anyone can find out the size, contents, and beneficiaries of your estate. This can be embarrassing and frustrating for your family, create disputes, and expose your family to unscrupulous solicitors.