Estate
planning is needed in
order to avoid dying "in testate." Dying in testate means that you die without having created either a will or
a trust, which will provide
instructions for passing
your estate onto your
heirs. Dying in testate
is similar to taking
your property and attempting
to toss it out to your
heirs on the other side
of a deep gorge filled
with hazards. These hazards,
which include (probate,
creditors, con artists,
lawsuits, judgments,
lawyers, and death taxes,
can cause damage to the
value of your estate.
Whether
they are aware of it
or not, all property
owners have done estate
planning for the distribution
of their estate to
their heirs. Without
a will or a trust the
inheritance laws (laws
of intestacy) of your
state of residence
will determine how
your property will
pass to your heirs.
If you have no heirs,
the assets will be
taken by the state.
Often the state's formula
and rules for moving
assets to your heirs
will not be what you
would have chosen if
you had taken the time
to do some planning.
The
best way to get your
estate over the in
testate gorge is to
build a bridge to your
heirs, better known
as a trust. This provides
for the estate to be
safely taken over the
financial risks posed
by probate, creditors,
con artists, lawsuits,
judgments, lawyers,
and death taxes. Here
are these financial
risks so that you can
understand what they
are and how you can
avoid them.
If
you die with any property
titled in your personal
name, there must be
a probate process for
that property. Probate
is the state's legal
procedure for handling
two major functions
for your estate: identifying
the rightful heirs
to the estate and the
share size that each
will receive, and getting
legal title of the
property out of your
name and into the name
of the heirs. Having
a will drawn up prior
to your death takes
care of the first function,
identifying the rightful
heirs and their share.
If you have no valid
will for your estate,
the state then uses
its own formula determine
who the heirs are and
what their shares will
be. But even with a
will the re-titling
of your property still
has to be handled through
a court administered
probate procedure.
When someone dies the
only way that their
property can be legally
re-titled in the heirs'
names is by a court
order.
Avoiding
probate is desirable
because it is time
consuming and expensive.
Reliable estimates
are that on a national
average probate cost
run from 6% to 10%
of the value of the
estate. This means
that an estate which
is worth only $200,000
could cost between
$12,000 and $20,000
to probate. These costs
are based on the property’s
fair market value,
not on just the net
worth or equity. In
some cases probate
ends up in litigation
dragging on for years.
It frequently leads
to family battles and
often causes the decedent's
wishes to be ignored.
In addition, probate
procedures are made
public, which can cause
the loss of family
privacy.
A
good way to avoid probate
is by using a family
estate planning trust,
either a living trust
or a life estate trust.
Thinking of the trust
as a bridge, which
allows a trustee to
carry your assets safely
across the intestacy
gorge to your heirs
on the other side.
The way a trust avoids
probate is by titling
your property in the
name of the trust prior
your demise. During
your lifetime, you
have complete control
of the property, however
the trust is considered
to be the property’s
legal for title transfer
purposes. Upon your
death a trustee preselected
by you simply handles
the transfers or payments
to your specified heirs
named in the trust.
You also have greater
flexibility in specifying
the details of these
payments and transfers.
After you pass on the
trustee can handle
everything quickly
and simply without
lawyers, court supervision,
excessive costs or
delays
If
you would like more
information regarding
asset protection, trusts,
family limited partnerships
or the subject of this
article please call
or email our office.
