Estate Planning Lawyer – Myths and Benefits
General Myths and Benefits of Doing Estate Planning
One can simply do a Trust themselves, without having to engage the services of a qualified attorney.
Response: The print and broadcast media are being saturated with advertisements for do-it-yourself Living Trust, ranging in price from $19.95 and up. Please, do not waste your money! The subject of a Living Trusts is just too complex of an area to “play with,” and far too much of your estate is at stake to risk such an unwise move.
The price being charged to do a Trust is an accurate way to measure how good a Trust it is.
Response: Frequently, an attorney will charge a client a significant amount of money for a fair, at best, Living Trust. In other words, a client may be charged three to five times more than the price of a perfect (properly written) Trust. Clients may even be charged for the attorney’s learning time (which may even include the time spent researching which provisions should be included in a Living Trust). In today’s enterprising Living Trust market, Living Trusts can be obtained at every price imaginable. However, if you want to avoid probate and preserve your estate, you must “do it right” and get a good Living Trust with the appropriate documents. Remember: Anything less than a good Living Trust will eventually be a nightmare for you and/or your heirs.
A “thin Trust” is just as good as a “thick Trust.”
Response: A quick rule of thumb to use in determining if a Living Trust is comprehensive or not is to see whether the document is a “thin Trust” or a “thick Trust.” A good Living Trust must necessarily be a rather thick document if it is going to adequately handle the many contingencies that may occur during a lifetime of the creator.
Being in probate is not that big of a deal. After all, it is essentially a part of the government (judiciary) and my tax dollars are paying for that.
Response: One of the most important reasons for having a Living Trust is to avoid probate. In the United States today, probate is one of the most agonizing and expensive experiences in which an individual can experience. To name someone as executor of your Will (means the individual will eventually take part in the probate process) is to place an incredibly painful burden upon that individual. Essentially, even in Kansas and Missouri – which are generally comparatively expedient states, when an individual passes away, their heirs will not be entitled to receive their share of the estate for at least eighteen (18) months to two (2) years after the death. In addition, the estate will be charged generally 8% of the total value of the estate, plus attorney fees. In contrast, an individual that has a Living Trust generally may receive their designated share of the estate within a week or 10 days following the death (if not shorter) and there is no need for an attorney.
Probate requires the following actions:
- Proving in court that the Will is valid
- Identifying and inventorying your loved one’s property
- Appraising the property
- Paying debts and taxes
- Distributing assets as directed by the Will
- Transferring title and ownership assets to the proper beneficiaries
If you have been named as a personal representative in a Will, you have certain responsibilities. They include:
- Giving notice to beneficiaries and other parties
- Receiving claims against the estate
- Paying valid claims and disputing others
- Distributing the property according to the terms of the Will
I will not lose any privacy by being in probate.
Response: Nothing could be further from the truth. Most people fight to be free from an invasion of their privacy-whether it is from someone entering their homes uninvited or from someone looking at their financial information. Yet, each individual sits on a time bomb set to go off upon his or her death of his or her spouse-because part of the probate process is to make the estate records part of the public record. Anyone can go down to the courthouse and look at the assets of a deceased person’s estate. The Internet provides immediate access to some of the most famous Wills (for example, Elvis). Everyone can learn the size of the estate, the debts, and the cash available-as well as the cost to settle the estate.
I will avoid probate by putting my assets into joint tenancy.
Response: All too often, individual’s try to avoid probate by holding assets in joint tenancy. However, the use of joint tenancy has a serious potential disadvantage:
- Joint tenancy with children can be dangerous. If you hold the asset in joint tenancy with one or more of your children, you could lose your asset. For example, if your child has an automobile accident that results in a loss, the asset is subject to being lost, since it is now considered also the child’s asset/estate.
- Joint tenancy loses “stepped-up valuation.” When property is held in joint tenancy, rather than community property, half of the potential stepped-up valuation is lost. The loss of stepped-up valuation can result in very costly tax consequences. In other words, if an asset has increased in value over the time it is owned (for example, real estate), the beneficiary in a Living Trust receives the property with the value of the property as of the date of death of the provider. Therefore, if the recipient decides to sell the property, they would only be responsible to pay the associated taxes on the property that has increased in value since the date of death (not the value of the property since it was originally bought).
- Joint tenancy forfeits one of a federal the federal ($5,000,000 – 2011) estate tax equivalent exemptions. By passing all of your assets to your spouse through joint tenancy, you effectively “throw away” your $5,000,000 tax benefit exemption, therefore, the surviving spouse is left only with one exemption.
- Not all assets are generally held in joint tenancy. Most estates fail to properly title all assets as being owned in joint tenancy. Items which are not held in joint tenancy must go through probate.
- Joint tenancy does not eliminate all costs. Although joint tenancy can avoid the time and frustration of probate, it does not avoid the related legal costs. Those survivors will turn to an attorney to transfer the assets into the name of the survivor.
- Joint tenancy does not eliminate probate. With joint tenancy, probate is inevitable. Even though joint tenancy can avoid probate on the first spouse to die, the entire estate must go through probate upon the death of the survivor.
My estate will pass intact without incurring any estate taxes.
Response: Such an occurrence seldom happens. Upon your death, estate and inheritance taxes can destroy your estate, which you worked so diligently all your life to create. These two unpleasant taxes can essentially take away almost half of your estate. Typically, the last person to learn about taxes is the surviving spouse (or children), who are ill-prepared to handle the tax aspects of settling an estate.
Only the wealthy need a Trust.
Response: Wrong. In Kansas, once an estate simply exceeds the value of $40,000, it must go through probate. In Missouri, an estate will go through probate once it exceeds the value of $20,000. Also, any real property (land), regardless of its value, must go through probate.
Upon one’s death, all of the Trust assets must be immediately distributed to the heirs.
Response: All too often, clients have the “Will Syndrome” – the understanding that upon death, all of the assets of the estate must be distributed outright at the conclusion of the probate process. This distribution of assets is true for a Will, because there is no legal entity left to hold the assets. If you have a Living Trust, however, the assets do not need to be distributed. In fact, when one has a Living Trust, the benefits and options of allocating and distributing the assets are unlimited. As an example, in the event of a minor beneficiary, they may be entitled to receive part of their inheritance when they turn 25 years of age, again they would receive another portion when they turn 30 years of age, and a final (or balance of their share) when they turn 35 years of age. By “spreading out” their receipt of inheritance, they may avoid the situation where they would “blow the money” on a frivolous gesture.
The main purpose of a Trust is to protect your assets or wealth, avoid probate, minimize or eliminate taxes, and ensure your wishes are followed. At the Dorsch Law Firm, we can explain your options and help you decide what is best for you and your family. It will be the best decision you’ve ever made regarding your wealth! Contact us today or call (913) 685-9190!