As an attorney in Nevada, I’m required to take 12 hours annually of continuing legal education classes to maintain my license. I recently attended an 8-hour wills, trusts and probate class to knock out a good chunk of my requirements for the year. The instructor was very critical of attorneys that push living trusts going so far as to say that they are unnecessary for most people. While he was correct for very low asset estates, he was wrong as for most Americans. This is when I realized that he was primarily a probate attorney. Probate is a time consuming and expensive process that only a probate attorney could love.
While many don’t need to worry about the estate tax much anymore, there’s many reasons a revocable living trust is a great planning tool and superior to a will. Avoiding probate entirely is one of them. Let’s look at a typical probate scenario and the ask ourselves if that sounds good.
A typical example might be:
A $400,000 estate would generate:
$11,000 attorneys fee
$1,200 in Court costs and a
$11,000 Executor’s fee.
That’s $23,200.00 to collect, divide and distribute your estate after you die. Keep in mind these fees and costs are based on a percentage of the total assets, thus these numbers go up as the size of your estate goes up. Even worse, the total estate size is based on the gross value of your estate, not the net. Thus, a house with a huge mortgage is valued at the fair market value and not the smaller net equity value. Not a wonder some attorneys love the fee structure associated with probate.
What about time?
Assuming we can meet every deadline, a probate can be completed in 6 months in most counties in Nevada. However, any problem and it’s going to take longer. How long? In some cases, up to 18 months.
None! Everything is a public record, your will included. Notices must be sent to every family member, even those not included in the will. They can even make frivolous claims on the estate under various theories. And even if its utter nonsense, it’s still going to dramatically delay the settlement of the estate. Every creditor will have to be officially noticed. Formal accounting will need to be conducted and become part of the public record. Does this sound fun?
Yes, the fees, time delay and lack of privacy of a standard probate are great. However, do you know what happens if you own real estate in another state? Even your Hawaii timeshare counts here by the way. If not properly included in a trust it is likely your Executor will need to hire another probate attorney in that other state to help move the asset to your heirs. It can cost more to do the ancillary probate than the property is worth, yet it MUST be done. This scenario can drive up costs even more.
What about the first death between a husband and a wife, do you know what can happen there? Could your estate end up in probate? There is a common misconception that all assets owned by husbands and wives belong to the other, automatically, at death. This can be the case but is not an automatic rule. Additionally, what if the surviving spouse remarries? Don’t we want a plan in place to make sure the heirs get what was expected? Don’t count on future spouse number two genuinely caring about your heirs. We need to plan properly to make sure things come out right.
Just because your estate might be below the $5/$10 million federal estate tax exemption does not need you do need a trust. That seems to be the ridiculous conclusion of many a cocktail party “expert”. The costs and delays of probate are very real and have no connection to the estate tax exemption levels. All the above can be avoided with a properly drafted and funded revocable living trust. At the same time, you maintain total control and flexibility before and after your death.
You can avoid the huge costs and delays of a standard probate, you can avoid any disputes at the death of either spouse, and you can avoid the need for multiple attorneys if you happen to own assets in other states or countries. A living trust can save your family countless thousands of dollars, avoid any delays and make sure your assets are distributed exactly as you desire. Your heirs can literally take the trust in one hand and certificate of death in the other and begin accomplishing your wishes.
How great will it feel to have your plan in place, knowing that things will be settled quickly and easily, and at a fraction of the cost? Basic estate planning is not as expensive as it used to be. Attorneys like myself use state of the art computer systems to assist in drafting custom tailored plans at a fraction of what things used to cost. These tools are no longer just for the wealthy. In Nevada, if your estate is larger than $20,000.00 or includes any real estate you would benefit from a revocable living trust. Feel free to give me a call if you have questions. I’m here to help.