For many, the word "probate," when used in the context of estate planning conjures up all manner of negative emotions. Curiously, most folks do not know what probate is, let alone why they may want to avoid it.
Or, even if they should avoid it.
So, should you avoid probate?
That is a discussion for you to have with an experienced estate planning attorney.
He or she can help you determine the most appropriate estate plan for your unique circumstances right now and revise it as needed in the future as things change.
However, regarding the subject of probate avoidance, we turn to a recent article in The Des Moines Register.
The article, titled “Unpacking the Perils of Probate,” reminds us that your estate will become a matter of public record if subject to probate.
Consequently, if you want privacy even after you pass away, then make plans for your assets to avoid probate.
Think Michael Jackson and his fabled Neverland (and other related issues).
Compared to all of the moving parts in the Michael Jackson estate, I seriously doubt anyone will really care who will inherit my ceramic bullfrog collection.
I digress.
With headlines of celebrity estates and the errors of the rich and famous, some people maintain that a will is all they need for their assets to be administered outside of probate.
Au contraire.
A will “tells” a probate judge how you want your assets distributed through probate, not around it.
To prevent your assets from going through the probate process, here are just a few steps you can take.
Designate Beneficiaries:
Both life insurance policies and retirement accounts provide for beneficiary designations directing who will receive these benefits when you die.
A will has no authority over beneficiary designations and they pass assets outside of probate.
You should review these designations regularly to ensure that they are consistent with your current estate planning objectives.
Teaching point: If there is no beneficiary designated, then the policy or account may be subject to probate.
Set up a Trust:
What if you have quite a few assets that are not covered by beneficiary designations?
Consider creating a living trust to avoid probate.
Not only can a "funded" living trust avoid probate at your incapacity and death, but a trust can allow for a seamless wealth transfer with more control over your the inheritance for your loved ones after you pass.
Note: An inheritance trust can be created under a will, albeit through probate.
Regardless the approach you ultimately take regarding probate, inheritance planning is especially important when you have minor children and do not want them to receive their inheritance in one lump sum.
Sidebar: Living trusts tend to be more expensive to set up than a will, but can be less expensive to wrap up.
Interestingly, this can be a rather significant consideration depending on which side of the Kansas/Missouri line is home to you.
For example, under Missouri law, the attorney and the executor are each entitled to "default" fees based on a "minimum" percentage on the value of the estate passing through probate.
Under Kansas law, the fee for the attorney and for the executor must be "reasonable" based on the actual work done. There is no minimum "commission" applied.
Example: A $1,000,000 checking account passing through Missouri probate will result in a "default" payday in excess of $25,000 each to the attorney and executor processing the estate.
On the other hand, in my experience, the total fees and costs under the same fact pattern in Kansas would cost about $2,500.
Big difference, yes?
Teaching point: Wills for Kansas and Missouri residents should provide for compensation to be based on the "lesser" of a "minimum percentage" or a "reasonable fee".
Why?
I have used this approach successfully, because I have found it not uncommon for clients to migrate between states for a variety of reasons.
All that noted, whether your estate passes through probate enroute to your loved ones or skirts probate, a fundamental key to a successful estate plan is the degree to which your "paperwork" (i.e., legal and financial) is up-to-date and easy to locate.
Period.
The three commonly cited perils regarding probate are that it is a lengthy process, is costly (e.g., court costs, publication fees, and attorney/executor fees) and is invasive of one's privacy.
In my 30 years of experience, these perils are, for the most part, oversold.
Again, your personal organization is a fundamental key to avoiding/mitigating the first two of these three common perils and very few of us have estates that will attract the curious and nosey at our passing.
In the end, only an experienced estate planning attorney can guide you through your options and implement a plan to address your unique circumstances.
So, how do you find an "experienced" estate planning attorney?
First, ask around. Friends, family and other professional advisors are trustworthy sources.
Second, conduct an "organic" search on "Google" for "estate planning" near you (e.g., "estate planning Overland Park KS".
Third, either way, verify. Check out the education, experience, ratings and client reviews of any attorney before you contact him or her.
How?
There are two helpful resources just a mouse click away to assist with your due diligence: Avvo.com and Lawyers.com.
Check any Avvo ratings, client ratings/testimonials and attorney endorsements on Avvo.com and any "peer ratings" by judges/other attorneys and any client ratings/testimonials on Lawyers.com.
In fact, I use both of these services to thoroughly vett attorneys before referring members of our "client" family for legal help in other areas of law or for matters in jurisdictions outside Kansas or Missouri..
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
Reference: The Des Moines Register (August 3, 2015) “Unpacking the Perils of Probate”
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