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Estate and Financial Planning Issues Explained

WHAT IS ESTATE PLANNING?

Estate planning is the development of specific steps for managing your wealth and assets while you are alive and distributing your assets in the event of your death. An effective estate plan should accomplish several important goals:

• it should make sure that your wealth reaches your intended heirs in the manner you choose;
• it should minimize the erosion of your wealth from unnecessary legal fees, court costs, probate, federal and state taxes;
• it should transfer your estate as quickly as possible;
• it should allow for control of your estate to remain within your family;
• it should virtually eliminate the necessity of a court appointed guardian if you become unable to manage your affairs;
• it should transfer your wealth in a private and personal manner

Isn't estate planning Only for the rich?

Many believe that only the rich need to plan their estate - which is not true. Your home, modest investment portfolio and life insurance should be protected. In most states, an estate of more than $50,000 will be subject to probate. It may also be subject to taxes and other liens. Small or large, your estate should be protected.

What if I choose Not to plan?

It is estimated that as much as 70% of the American public chooses to do nothing concerning proper planning of their estate. Some believe that such planning is only for the wealthy, while others simply feel they do not have the time.

Don't fool yourself

Remember: whether you like it or not, you will have an estate plan when you die. For most people, the courts will write it for them and will force it upon their loved ones. Someone else will decide who will receive your wealth and who will become the guardian of your children. Your loved ones will have to bear the burden of unnecessary legal fees, bonds, appraisal fees, court costs, federal and state taxes, and more. The better alternative is to take control of your estate, plan for yourself and your family. This peace of mind comes from proper planning.

THE PERILS OF PROBATE

Over the years, this system has been transformed into an expensive legal nightmare in which lawyers, courts, guardians, administrators, estate appraisers and bonding companies help themselves to a substantial portion of your estate.

Probate can translate into a heavy burden for your loved ones;

1.  EXCESSIVE FEES - attorney fees, executor fees, appraisal fees, court filing fees and bond premiums. Probate fees can range from 4% to 10% or more of the entire value of the estate.

2.  EXCESSIVE DELAYS - depending upon the complexity of the estate, probate takes an average of six months to two years to complete. During this time, your loved ones have no control of your assets. State law provides for a family allowance; however, Probate Court approval is required. Honestly, how many adults want a court to pay them an allowance out of their own money?

3.  PUBLIC RECORD - every detail of your family's financial status is available for public scrutiny.

4.  PSYCHOLOGICAL IMPACT - rigid court proceedings are a constant reminder of your death or that of your loved ones. Probate prevents closure and is an open wound that will not heal until the probate is finished. Once again, you are deprived of control.

5.  MULTIPLE PROBATE - probate must occur in every state where real estate is located.

6.  LOSS OF CONTROL - Someone other than your family may decide where your assets go at your death. A living trust can provide a means to "give your family the yo-yo while you keep the string." Once again, you, or the trustee you choose, are in control.

HOW MUCH COULD PROBATE COST ME???  

In most states, if you own property or assets valued at $50,000 or more, your estate will be subject to probate. Additionally, if you own property in more than one state, your loved ones could be forced to face probate in each of those states. The following are examples of probate fees based an average probate cost of 7.5% of the net estate. *

    Estate        Approximate        Estate      Approximate

    Value         Probate Fee          Value        Probate Fee

  50,000.00         3,750.00            300,000.00       22,500.00

  60,000.00         4,500.00            325,000.00       24,375.00

  70,000.00         5,250.00            350,000.00       26,250.00

  80,000.00         6,000.00            400,000.00       30,000.00

  90,000.00         6,750.00            425,000.00       31,875.00

100,000.00         7,500.00            450,000.00       33,750.00

110,000.00         8,250.00            475,000.00       35,625.00

120,000.00         9,000.00            500,000.00       37,500.00

130,000.00         9,750.00            550,000.00       41,250.00

140,000.00       10,500.00            600,000.00       45,000.00

150,000.00       11,250.00            650,000.00       48,750.00

160,000.00       12,000.00            700,000.00       52,500.00

170,000.00       10,150.00            750,000.00       56,250.00

180,000.00       13,500.00            800,000.00       60,000.00

190,000.00       14,250.00            850,000.00       63,750.00

200,000.00       15,000.00            900,000.00       67,500.00

225,000.00       16,875.00            950,000.00       71,250.00

250,000.00       18,750.00         1,000,000.00       75,000.00

275,000.00       20,625.00         2,000,000.00     150,000.00

*Footnote-Texas law does not provide a cap on Attorney's fees in probate proceedings. The only "limit" is the ethical limitation requiring lawyers' fees to be "reasonable".

PROBATE PROBLEMS EVEN WHILE YOU ARE ALIVE!

The problems and perils of probate can start long before you die. That's right. Your property can be subject to the supervision and control of the probate court while you are still alive---- it's called a Guardianship. In Texas to fully assist you, your family will need two guardianships: 1) of your person and 2) of your estate.  

If you become incapacitated and are unable to manage your affairs, the court can appoint a guardian. A guardian then makes decisions concerning your health and assets and can entangle you in all the delays and expense associated with probate, even while you are alive. In fact, under Texas law, a guardianship is governed by the probate code. Guardianship can be far more devastating than probate - at least probate must come to an end! Even though probate can be costly and time consuming, eventually your loved ones will receive your inheritance. Under a guardianship, your property is subject to the supervision of the court until you recover or can prove you are capable of managing your own affairs or, if you don't recover, until your death. A Will offers absolutely no protection from guardianship proceedings.

WHAT ARE MY OPTIONS?

• A Will - directs the transfer of your assets to your heirs, subject to court approval. However, a Will does not protect you from the cost and stress associated with probate, taxes and excessive delays. Additionally, different states allow for differing interpretations of clauses noted in some wills. If you move from state to state, costly revisions may be required.
• Joint Tenancy - occurs when two or more individuals hold title to any asset. Should one of the individuals die, the surviving joint tenant automatically becomes sole owner of the property. Though probate is avoided with the passing of the first joint tenant, probate procedures are required upon the death of the final survivor. You lose control of your property under Joint Tenancy because you cannot sell or borrow against assets without the consent of the other joint tenants. Expensive and lengthy court intervention would be required to disburse property in dispute. Another concern of this planning option is the significant capital gains tax liability associated with Joint Tenancy. Finally, if your joint tenant is sued you could lose your property.
• Revocable Living Trust - the transfer of all your assets from you as an individual to yourself as the Trustee of the Trust. You then manage all of your wealth and assets for your own benefit as Trustee, and you have absolute control over all assets and actions of your trust-spending, saving, investing or gifting assets without restrictions. Simply amending the terms of the trust can accommodate any changes that you desire. You can also revoke the trust at any time.

THE REVOCABLE LIVING TRUST

The foolproof way to pass your estate along to your heirs without lawyers, courts, or the probate system. Here are just a few of the reasons the Living Trust can make the old-fashioned Will- OBSOLETE:

• Eliminates estate-devouring probate costs and attorney's fees
• Speeds up the distribution of funds to your heirs by months or even years
• Assures that no one may contest or overturn your wishes regarding the disposition of your estate
• Is entirely private, rather than a public document open to anyone
• Is totally revocable, allowing you to change your mind at any time

"Where There's a Will, There's a Way", for a Lawyer to Rob Your Family Blind

With or without a will, your heirs go to court!

Even if you have a modest-sized estate and a Will, your family is bound to wind up in probate court. The probate process will take 6 to 24 months and can eat a large percentage of the estate you worked so hard to build all your life...then the estate taxes can devour up to half of what's left. Even while you are still alive-but too weak to put up a legal fight-a judge will not authorize the stipulations you specifically put in your will, because you must die in order for your will to take effect. Your Will does not help you while you are living.

Why on earth should you put up with all this? Although the laws are complex, chances are good that you can avoid probate-and some, if not all, of the estate taxes. Easily! Cost Effectively!

After you set up the proper plan and keep it completely funded, fees to courts or lawyers or administrators in the probate arena are normally not necessary. Usually, disbursement can happen in 24 hours; your spouse will not have to go to an unfriendly stranger and beg for funds to live on. There may still be a need for additional legal assistance from an attorney and /or estate planner during your lifetime and after your death, but the costs of these services will be small compared to the expense of out of date documents that are disallowed in a probate proceeding.   

Do not kid yourself about avoiding probate with cutesy " power of attorney" or "joint ownership" arrangements. They are too risky. Look into the real facts. If you are a good candidate for a living trust, you can keep your assets a private, family matter instead of a playing for the public courts.

EXCERPTS QUOTED FROM LOUIS RUKEYSER'S FINANCE & INVESTMENT

THE BEST OPTION - A REVOCABLE LIVING TRUST  

• Avoids Probate - If properly funded, the revocable living trust protects you and your family from the perils of probate. Upon your death, your wealth and assets can go directly to your loved ones, without having to pay associated expenses such as:

• ADMINISTRATIVE FEES
• ATTORNEY FEES
• BOND POSTING FEES
• COST OF ASSET LIQUIDATION
• EXECUTOR FEES
• EXPENSE OF POTENTIAL WILL CONTESTS
• EXPENSIVE APPRAISALS
• EXPENSIVE LITIGATION
• PROBATE COURT COSTS

PLUS

• NO WAITING PERIODS OR DELAYS IN DISTRIBUTING ASSETS -instead of waiting six months to two years, your loved ones can receive your property in less than a month, if that is you wish.

AND

• TOTAL CONTROL OF ALL ASSETS - whether you are living, incapacitated or at your death, you and your family are in TOTAL CONTROL of your assets without outside intervention. You or your successor trustee can buy, sell, trade, encumber or convert any assets according to your wishes.

  Contact us to schedule a one to one meeting to discuss your best option.