Why Invest in an Estate Plan? – The Probate Problem
An estate plan can protect your loved ones, minimize tax spending, provide you with the proper health care treatment and determine who will receive your inheritance.
You make decisions every day. You manage your money, care for your family and your home, and make plans for the future. One day, however, each of us will have to face the reality of not being able to effectively make those decisions any longer and will have to find help. I think we can all agree that it would be better to make those decisions while we can, than to leave it to someone else to make it for you.
Estate planning is a simple way for you to pre-plan how you want things to go as you grow older. What kind of care you want, what kind of legacy you would like to leave to others, and who will see that it gets done. It has been said that if you fail to plan then you plan to fail. If you fail to plan for your estate, your estate could face probate.
Probate is a government process or system administered through the courts that helps in the orderly distribution of your assets after you have passed away. The probate process works if you do not have an estate plan, but it can even controls estates where the decedent left only a will as their main estate planning document.
Here are four things you should know about probate:
- Cost: Probate costs are based on the size of the estate. Attorneys and executors use the statutory fee schedule of California (link to page). This can run up a high fee that is paid from the assets of the estate instead of being distributed to your beneficiaries. Further, the lack of advance planning could result in significant tax consequences to your estate that could otherwise be avoided.
- Time: For estates with a modest amount of assets, a probate can easily take two years or more, and even longer if a contest arises. Hopefully, if you have a smaller estate and have no disputes, then maybe a probate could be relatively quickly at a year to 18 months.
- Loss of control: Instead of you having a say as to who and how your estate is administered, it will be giving to a judge and a court-appointed administrator, you may have never met and who doesn’t know you or your family or your priorities, to decide.
- Loss of privacy: Your family matters and potentially the entirety of your assets could become part of the public record.
What is the alternative?
Creating a Trust: Generally speaking, a trust is the most common and effective tool for holistic advanced planning for your estate and your heirs. Working with an estate planning attorney, you will identify your assets, ensure proper titling, consider long term care, your preferences for end of life decisions, specify how you would like your legacy to be distributed and who you would trust to see that it is completed.
For a recommendation to a qualified estate planning attorney, contact Fiduciary World (link) and we will be happy to send you a referral. Whatever you do, don’t wait until it is too late to make these decisions.