Imagine this scenario: The day comes which none of us can avoid and we pass away. Your wishes are clearly written in your Will. Then – out the blue, Cousin Stu comes back from Timbuktu and contests your Will saying that he deserves half of your fortune! He found out because the Will and its contents are public knowledge. Your distraught heirs would eventually give into his demand because of court costs, hassle and grief.
Even without Cousin Stu, the costs for survivors can be high and the hassle can be rough. This is due to the process of probate. Probate is a process that was started for the benefit of creditors. It requires the estate to stay open for a specific amount of time in order for people to come forward and claim debt against the estate.
As you may or may not know, it is not a private process. Once your estate goes through probate it becomes public record; in other words anyone could go to the courthouse and look up your Will. This allows them to see what you left, who you left it to, and how to contact that person. This could be useful to faraway family members, and just as useful for the dishonest.
Probate is also costly; you have to pay fees to the courts which are actually quite minimal, but the large fees come with the retention of an attorney. Attorneys’ fees are usually about 5% of the gross estate, plus any expenses that they incur along the way (i.e. postage, fax, phone bills). Also, the cost of keeping the estate open in the event of a disagreement to distribution can be high. We have heard stories of estates dwindling to 20% of what they started at because of a disagreement, drawn out probate and poor market conditions.
This is obviously not typical, but it could happen. There is a final cost associated with probate – the cost of the executor’s time. When an estate goes through probate the executor has to go to the courthouse. There is a lot of paperwork to be filled out and unfortunately the employees are not instructed to be very helpful, but rather direct you to an attorney for further questions.
Your executor will need to go to the courthouse to deal with probate, probably several more times throughout the probate process. This will be on top of assuring that the distribution is carried out as your Will instructs.
This is a lot of hassle and trouble, but there is a simple way to avoid these problems. The simple answer is a Trust. A Revocable Living Trust is like a container for storing your possessions. It’s like a box with no constraints; you can put anything that you own in the Trust. When things are put into the Trust they are then owned by the Trust. You will maintain complete control of your possessions, by naming yourself as Trustee. This allows you all of the control you had before, plus the added benefits that a Trust provides. Keep in mind that the Trust in discussion is revocable, meaning you can change it; you can add to it, and take from it. This trust can be thought of as a checking account. When you die, the Trust remains very much alive, and therefore anything that is in the Trust does not go through probate. You can name distribution, just like in a Will. However, with a Trust, stipulations can be added. (Perhaps, your wish is that a beneficiary must complete college before the inheritance is given). Unlike a will, a Trust makes it so that any disagreement to the Trust will not hold up the distribution.
As for the final point that I mentioned, privacy; a Trust is completely private. Anything in a Trust does not go though probate; therefore it does not become public record.
This has really only scratched the surface of Trusts and what they can accomplish for you. It is critically important that Wills, Trusts and other estate documents be current and up to date. If you are without a Will, need to update a Will or add a Trust we may discuss these documents via phone or meet to review them in detail. In addition to a Trust you may want information on Power of Attorney, Healthcare Power of Attorney, Medical Directive, or Living Will.
We can also conduct an “Estate Document Lunch & Learn Workshop” in an office setting, a unique, voluntary benefit that employees appreciate with no cost to the company.
We look forward to speaking with you about your estate documents. Please call or email us to set an appointment or to discuss.