How Your Family Can Avoid Probate
As you wake up and drink your first cup of coffee this morning, I’m fairly certain the first thing that pops into your head to add to today’s “to-do” list is not arranging your affairs so that your estate avoids probate for your heirs.
Interestingly enough, however, when it comes to the questions I receive each week, take a guess what many of your questions relate to?
You guessed it.
One of the top 3 that I receive the most revolves around specifically how to make sure that all your assets pass on to your heirs as smoothly as possible, with less delay from probate, and with as little estate taxes as possible paid to the federal and state government.
The reason I believe this is on your mind is because you’ve either been through, or know of someone who has recently had to settle an estate for a relative. And, you saw what a disaster it can be without proper planning.
Putting an End to This Problem
The good news is that the solution is rather simple. As you’ve heard me drive home before, you really need a carefully thought out estate plan with a revocable living trust as the main component.
Your estate planning attorney may suggest that you don’t need a living trust because your estate will owe no estate taxes upon your death based on current laws.
And, in many cases today that is true because estate tax exclusions have rapidly increased in the past few years to $5 million each.
However, the real problem that everyone wants to avoid is probate.
Probate is the process of validating your will in a court of law at your death and the average length of time to probate and settle an estate in Massachusetts is in excess of 12 months! Neighboring states have similar problems.
Probate is a very lengthy process which, in addition to the time involved, can rack up sizable attorney bills.
Here’s the good news! If you have a “properly funded” living trust, probate can be avoided completely, thus drastically diminishing the need and cost for most of the work done by an attorney at your death.
Living Trust vs. a Will
What a properly structured living trust does, that a will can’t, is direct your assets:
- To whom you want
- When you want (you can delay benefits passing to one beneficiary while paying them out immediately to another)
- The way you want (you may stagger the delivery of the assets to one beneficiary while giving them in a lump sum to another)
Most importantly, you can accomplish this without the cost and delay of living probate or death probate.
Living probate occurs if you are incapacitated, but still living, i.e. a coma. A living trust becomes operational the day you sign it and can have provisions for you while you’re alive as well.
A will does not do that.
Death probate occurs after you die and is the process of validating the wishes spelled out in your will in a court of law. Once it clears the long delays of probate, the assets can then be distributed and “re-titled” in your beneficiaries’ names.
With a properly funded living trust, probate can be avoided completely, and the assets pass directly to the beneficiaries saving thousands of dollars in costs and months of headaches for your children and other beneficiaries.
Later this month, we will discuss the most important step to take with your living trust that the overwhelming majority of individuals forget to take which negates the main benefit of establishing the trust in the first place.