Tag: estate plan

What’s So Bad About Probate?

April 25, 2010 /

The short answer – maybe nothing, maybe something. Whether probate is “bad” is a case-by-case scenario specifically based on what is most important to the individual or family who has no estate plan or who has a will-based estate plan.(or worse, a trust-based plan that was never “funded!”).  But Mike, I thought a will bypassed probate.  That is a common misconception.  A will does not bypass probate . . . a will guarantees a probate.  The will must be probated for it to have any effect.

Ok, that was an aside – back to the topic at hand: probate.  Like I was “saying,” your most important goals and objectives will determine whether or not probate is a “bad” thing for your situation.  Here are the most common complaints I hear and which I am routinely asked to help avoid:

Time consuming: probate can be a very lengthy process.  In my experience, the average probate in Michigan lasts a minimum of 6-9 months (except for very small estates).  I rarely, if ever, see the process take less time than that.  I do routinely see it take longer than that.  And the number one thing I’ve seen cause it to drag on longer (sometimes years!) is conflict.  Conflict among any one of several people, whether it be a case of multiple personal representatives (e.g., executors), between a personal representative and a beneficiary or beneficiaries, or someone who “didn’t get what they thought they had coming,” and they want to challenge it.

Costly: probate can be costly.  In my experience, the average cost is somewhere around 3-5% of the probate estate.  That estimate includes everything that could be a cost associated with the probate: probate fee, attorney fees, appraisal costs, bond premiums, CPA fees, filing fees, etc.  For example, let’s say you have a probate estate of $500,000 (not hard to get to if you include real estate, retirement, and other assets).  5% of $500,000 is $25,000.  That’s a decent “chunk of change,” that many people would rather have going to their family.

Public: probate is public.  I’ve had several people request that I “look into” an estate for whatever reason.  Simple enough.  I go to the county courthouse, go to the probate clerk, give them the name of the person who passed away, and they provide me the file (if a probate has been started).  I can look through everything: who the personal representative is, an inventory of the assets, the will (if there is one), what the final distribution (e.g., accounting) was, and more.  Anyone can look at the file.  So, imagine that you have a young child.  You (mom and dad) both pass away and your estate goes through probate.  The estate is put into a conservatorship estate for the benefit of your child and it will be paid outright to your child when he/she turns 18.  The entire thing is public record.  Not only is your child getting the entire amount left of the estate, but there could be less-than-trustworthy people who also know what amount he/she is getting because they’ve been monitoring the probate file.  Whose to say they won’t take advantage of that opportunity.

The good news is that you can plan around all of this by meeting with an attorney who focuses on estate planning – specifically one who does so on a relationship model, not a transactional one.  Someone who will really learn about who you are, not just what you have, so they can work with you to determine what YOUR most important goals and objectives are and create a plan that meets them.

The Game Is On: Billionaire Dies – Stakes Raised On The Estate Tax Issue

April 20, 2010 /

As mentioned in this article over at The Trust Advisor Blog, the stakes are now raised on what Congress will do about the estate tax as a billionaire recently died.  With no estate tax in 2010 (as it stands now), it seems he may have passed his $9 billion (with a “b”) estate to his heirs completely free of estate tax.  If last year’s estate tax rules were still in effect now, the IRS could have collected roughly $4 billion (with a “b”) in estate tax on the estate.

As the article points out, it must be awfully tempting for Congress to reinstate the estate tax in 2010 at its 2009 level and, they say, make it retroactive to the first of the year.  I have to imagine that, given the amount of money at stake now, any attempt at retroactively enacting the estate tax would be challenged tooth and nail by an army of lawyers on Mr. Duncan’s behalf.  It will be very interesting to watch, that’s for sure.  I’ll make sure to keep you updated as I learn more.

A BIG Oops! How Do-It-Yourself Estate Planning Can Disinherit Your Children

April 18, 2010 /

Wondering how that could be possible?  Rania Combs, a Texas Wills and Trusts lawyer, has a great blog post entitled “Do-It-Yourself Estate Planning Mistake Disinherits Child.”  Take the time to read the article – it is a quick read and very well done.  The article is especially poignant, as I have had more cases recently involving children from previous marriages.  Rania’s post is just one of several ways that Do-It-Yourself planning can harm a family and just one of several ways that no planning (or inadequate planning) can hurt a mixed family.

There are only two things I will add to Rania’s excellent post:

  1. Not only does Jack’s new wife have complete control of Jack’s assets and no obligation to use them for Rose’s benefit, but what if the new wife gets remarried?  If she remarries and doesn’t do any planning herself (or does typical planning), there is a very real likelihood that Rose won’t get anything.  I’m not just conjecturing . . . that is based on circumstances I’ve seen.
  2. Not only could Jack have set aside all or a portion of his estate in trust for Rose’s benefit, he could have set the trust up to protect those assets from Rose’s creditors, judgments, estate taxes in her estate, and even her own divorce.

Have you had this happen to you or know someone who has?  I am interested in the story, if so.  Please share via comment on this post or emailing me via our Contact Us page.

And They Say Stuff Like This Never Happens! Why You Should Include Asset Protection in Your Planning

April 11, 2010 /

A recent conversation with a banker friend of mine confirmed the value of advanced estate planning techniques and how they apply in a practical, “real life” sense.

Her story was all to familiar – I hear about these situations on a regular basis.  During life, Husband and Wife had an estate plan drawn up.  At least one part of it was a joint trust with no asset protection  components.  They trusted each other, so they were not worried about the surviving spouse doing anything with the trust assets other than what they initially agreed between them.  When the first of them passes away, the surviving spouse will continue to have the power to revoke or amend the trust in any way.  Fast forward many years – wife has passed away and Husband has a new wife.  That’s where the bankers story gets interesting.  Husband revokes the trust, comes into the bank with new wife, and proceeds to put all the bank assets from the trust into a joint account with his new wife.

Now, do you think that is what his first wife would have wanted?  If they had a typical distribution plan, it would have been set up to continue for the surviving spouse (which it did) and then had it split equally among their children.  Well guess what?  It’s quite possible that the children will get nothing.  What is Husband passes away before his new wife?  His trust is revoked and the bank assets (which are substantial) are in joint accounts with his new wife.  If he dies first without anything changing, his new wife stands to get the vast majority of his assets.  Who knows what else he changed to benefit her . . . beneficiary on life insurance, retirement accounts, annuities, etc.

What could Husband and Wife had done to protect against this?  They could have set their estate plan up in a way that guaranteed that not only a large portion of the assets would have gone to their children (no matter what!), but those assets could have been protected from Husband’s creditors, lawsuits against him, and yes, from a future spouse and even divorce.

Don’t misunderstand me, I am a HUGE proponent of marriage and think Husband and Wife should have trusted each other like they did.  I don’t see this advanced planning as saying you don’t trust your spouse, I see it as making sure that you protect as much as possible of what Husband and Wife worked so hard to create together and ensuring that it continues to benefit their family and not the government or creditors.  And this protection becomes even more important the higher your exposure to creditors is . . . for example, high-risk businesses, doctors, lawyers, and other professionals.

This is something I cover with ALL of my clients.  And no matter who you work with, make sure they understand how this protection can be beneficial and – more importantly – how to do it right!

What do you think?  Please share your thoughts.  I always enjoy comments from my blog readers.

Estate Planning for your Children’s Care (Guardianship)

September 5, 2009 /

First off, it has been far too long since I last posted.  A few crazy weeks of court hearings zapped what time I usually have to make informative posts to the blog.  You have my apologies and my promise to do my best to never go this long without posting again.

Yesterday, two things really caught my attention and reminded me how important it is for parents with minor children to have an estate plan.  Specifically, providing for guardianship of their children in their wills.

You may have heard of the controversial British public service announcement (PSA) against texting while driving.  It is a very graphic depiction of a severe car accident caused by a person texting while driving due to the graphic nature I am not posting a link to it here).  The entire video is troubling to watch, however I was particularly troubled by one scene.  A mother and father are in the front seats of the car, severely injured and unconscious (at a minimum).  They have a young daughter (maybe 4 or 5 years old) and a baby in the back seat.  Both children were properly in to their safety seats and had no injuries, and the daughter keeps asking her mom and dad to “wake up.”  As a dad, it broke my heart.  As an attorney it gave me a renewed sense of purpose to strongly encourage couples to plan for such an accident even though we all hope it never happens.  Hopefully the parents had a proper estate plan that provided guardians for their children and financial assistance for their care.  If not, a court would end up determining who would care for their children!

I also watched the movie “No Reservations,” starring Catherine Zeta Jones (CZJ) and Aaron Eckhart (AE).  I don’t want to ruin it for anyone who hasn’t watched it, so stop reading here if you don’t want to know what happened.  The short version is that CZJ’s adult sister dies in a car accident leaving a young daughter (maybe 7 or 8 years old).  It appears that the sister did proper planning, as there was documentation from a law firm stating that she wanted CZJ to be the guardian, and she indeed became the guardian.  The unique twist in this situation is that the sister was a single parent.  The father was never involved in the child’s life.  What would have happened if she didn’t have a proper estate plan?  I don’t know exactly, but there is a real likelihood that the daughter would have ended up with her father as guardian given that the law favors having a biological parent guardian.  Certainly this is not what the sister would have wanted.

Both of these situations could have ended up horribly for the children’s future care.  If you have minor children, you owe it to them to have a proper estate plan in place so that they are properly cared and provided for if, heaven forbid, you pass away.  If you have questions, please feel free to call or email me to schedule an appointment.  And give your kids a hug . . . they are a precious gift!