Declare Independence!
Jul 04, 2022
Happy Independence Day! I hope you are taking some time today to enjoy the freedoms we have in whatever way you want.
I know it sounds like a stretch to compare our country's independence to estate planning, but hear me out on this. In 1776, our colonial leaders decided they didn't want government oversight, taxation, and laws they didn't create to rule over their lives and property, and so we declared our independence. It wasn't as simple as that, since we then fought a war to back up that declaration.
In much the same way, you have the right to set up your estate to avoid government oversight, taxation, and the rules of the probate court if you put in a little effort by creating a Revocable Living Trust and fund it as the keystone to your plan rather than the government norm of a Last Will and Testament, which mandates court intervention. When your assets avoid probate, your estate also avoids:
* Costs averaging 4-10%, which is like avoiding unnecessary taxes; it’s just in the form of legal fees, appraisals, court fees. Unfortunately, there are some states that mandate a 5% fee, which can be completely excessive in proportion to the work done. For instance, one probate case we helped on had an (approximately) $700,000 bank account in California garner the out of state attorney about $35,000 for their work in processing one bank account. That was actually more than we were charging for all of the probate work in North Carolina.
* Delays of 6-18 months, which is like avoiding government bureaucracy. The more exacting the court process, the more pieces of paperwork, the more steps involved means delays until the estate is closed and the beneficiaries (and the executor or administrator) can breathe a sigh of relief that it’s done. A recent study actually put the average at 548 days, or about 16 months. https://www.estateexec.com/Docs/General_Statistics.
* Vulnerability to contests, which is like avoiding the possibility of confiscation of property (only by undeserving heirs rather than the government in this case). In fact, the probate court is set up to “make sure we get this estate settled right” no matter how much gets paid out of the estate in legal fees to the lawyer bringing the contest. This can cause a number of estates that were clear get muddied until the instigator is “paid to go away.” That’s not right. That’s not fair. But that is often the reality.
* Loss of privacy of your estate and financial information, which is like avoiding the government, and therefore everyone else, violating your privacy. All of the detailed inventories that have to be filed are, in reality, court filings. Because they are court filings, they are open to public inspection, and now everyone can find out your personal and financial information after you are gone. Including marketing people. And scam artists looking to prey on your beneficiaries.
I might be stretching this comparison, but I don't think so. You worked hard your entire life to build up the assets you have, and you already paid your taxes along the way. When you pass on, do you really want or need the government to get between your fortune and your chosen beneficiaries any more than necessary?
This is where using a revocable livingf trust as the core of your estate planning can really make a difference to you and your loved ones. All assets in a revocable living trust avoid probate, greatly cutting down or even eliminating the need for assets to go through the probate court meat grinder. For more information, check out my book Estate Planning Basics available on Amazon (previously called “The Anti-Probate Revolution”) by clicking here: https://www.amazon.com/dp/193589613X.
#estateplanning #fourthofjuly
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