A Trust is Often Better Than a Will
Contrary to what you’ve probably heard, a will may not be the best estate plan for you and your family. That’s primarily because a will does not avoid probate when you die. All wills must be filed in probate court before they can go into effect. Also, a will provides no protection if you become physically or mentally incapacitated. And it probably doesn’t give you the control you think it does if you have minor children or grandchildren.
What is probate and why do we have to go through it?
Probate is the legal process through which the court makes sure that when you die, your will is legally valid, your debts and taxes are paid, and your assets are distributed according to the instructions in your will. Probate is the only legal way to take your name off the title of an asset after you have died and put a new owner’s name on it.
Probate does not happen automatically. Someone, usually a relative or your executor, must petition the court for probate proceedings to begin—for example, when checks need to be written or when an asset needs to be sold or transferred to a new owner.
What’s bad about probate?
Probate takes time, usually nine months to two years, and sometimes longer. During part of this time, your assets will be frozen so an accurate inventory can be taken, and nothing can be distributed or sold without the court’s and executor’s approval. If your family needs money to live on, they must request a living allowance, which may or may not be approved. Also, assets could drop in value if the court and executor cannot react quickly enough to sell them—for example, if your family wanted to sell stocks in a declining market.
Your family has no privacy. Probate is a public process. Anyone can find out details about your estate simply by looking in the court records. This information is often used as leads by unscrupulous solicitors. If your estate goes through probate, some may call on your family.
Probate is expensive. A survey by AARP (American Association for Retired Persons) found that probate is big business. In fact, AARP estimates that probate costs could top $2 Billion a year—$1.5 billion for lawyers, and hundreds of millions more for bonding companies, appraisers and probate courts.
Probate costs must be paid from your estate before your assets can be fully distributed to your heirs. Total fees can vary, but in Minnesota typically range from 3 – 5% of your estate’s gross value.
Who gets this money?
While there are lots of costs associated with probate, most of the expense will go to lawyers’ fees. The lawyer who your family or executor hires is paid an hourly rate for the time he or she spends on probate matters. They lawyer will bill for meetings, phone calls, talking to their staff, reviewing the original will, drafting documents, filing documents with the probate court, having your assets appraised, and going to court. The longer the probate takes, the more money the lawyer makes.
Now you are probably beginning to understand why most lawyers want you to have just a simple will. Most lawyers won’t charge you much for a simple will, and you might feel like you’ve gotten “a good deal.” That crafty lawyer, however, will stamp his name all over your will and is betting on the fact that your family or executor will hire him or her to handle your probate. After all that’s where the big money is made! In reality, this sort of law practice is an inherent conflict of interest.
How do people avoid probate?
Many people avoid probate by using a Revocable Living Trust. A Revocable Living Trust is a legal document that, like a will, includes instructions for what you want to happen to your assets after you die. But, unlike a will, a Revocable Living Trust can avoid probate at death. It can prevent the court from controlling your assets if you become incapacitated. And it can give you, not the courts, control of the assets you leave to your minor children and/or grandchildren.
How can I decide if a Revocable Living Trust is right for me?
Call today to schedule your complimentary estate planning consultation with Ed Matthews.
Ed Matthews is one of only a few attorneys in the state of Minnesota who is also a currently licensed Certified Public Accountant (CPA). Ed graduated summa cum laude from William Mitchell College of Law in 2003, where he served as Executive Editor of the Law Review. He is a former Minnesota Supreme Court law clerk. Perhaps, most importantly, he does not practice probate! Instead, he has dedicated his life to helping Minnesota families avoid probate and protect their hard-earned assets.
To schedule a complimentary consultation with Ed Matthews, call (651) 501-5608.
Our next blog post will explain how Revocable Living Trusts work. Future blog posts will contain valuable information about other important documents to have in your Estate Plan, including Powers of Attorney, Health Care Directives, and Medical Records Authorizations.
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