There is a myth that a will is the only estate planning document you need. However, having a complete estate plan, which includes a trust, can prevent many problems with your estate after your passing. Here are four risks to your estate if you choose not to include one. Risk #1: No Direct Transfer of Real Estate to Family The number one reason to establish a trust is to allow your loved ones to inherit your real property in the easiest way possible. Property that is in a trust will be controlled by the successor trustee, who is chosen by you. Your trustee can directly transfer the property to your loved ones. This process is quicker than probate and will avoid a long, drawn-out court process. Remember, any estate valued over the state minimum is subject to probate, so most people (especially those who own a home) will need a trust if they wish to avoid court involvement altogether. Risk #2: The Rest of Your Estate Will Be Subject to Probate Even if you have a will, your heirs will still need to start a case with the local probate court to carry out your final wishes. Here is how it will go: 1. A judge will need to see your will and ensure that its valid, and then he or she will officially allow your named Executor to execute your wishes. 2. From there, your real estate will be inventoried and appraised. 3. Next, outstanding debts will have to be paid by your estate before the probate court distributes your property. This process can take between 9 to 18 months, or even longer! Alternatively, if you pass away without having a will (known as intestate), the courts will take even more time to determine who inherits your assets. There are state laws that dictate who is the "next of kin," and these may not be the individuals that you want to inherit your hard-earned assets. Finding these heirs and determining how much they stand to inherit according to such laws adds additional time and expense to an already arduous process. Risk #3: Probate Can Drain Your Estate Financially In addition to Risk #2- When an estate goes into probate, many professionals (lawyers, CPAs, appraisers, etc.) will need to be consulted and hired. Each step will cost time and money for your loved ones. And while your estate is tied up in this court process, your family will need to pay for these costs out of their own pocket until your assets are released. If your loved ones are not able to afford these costs an attorney might offer to take a percentage of your estate. For example: 10% of a $500,000 estate is $50,000 in legal fees! (See Intestacy calculator) Think about it this way… the cost of hiring a lawyer to create a trust now is a tiny fraction of the probate costs to administer your estate when you are gone.
Risk #4: Your Cash Could Get Tied Up, Leaving Limited Funds to Pay Your Bills If your financial accounts do not have properly named beneficiaries and an estate goes into probate, your money will be held up as well. This means your bank accounts will be frozen and your family will have no access to your funds. Your loved ones will be responsible for all the final debts that you have, including costs to settle your final affairs, bills, taxes, medical bills, mortgage payments, and funeral costs. Funds held in probate will not be released to cover any of these expenses until the probate judge allows, which as mentioned above could take a long time. Final Thoughts The good news is that by creating a trust, you can avoid just about all of these risky situations and ensure that your assets pass directly and privately to your loved ones when you are gone. If you have additional questions about creating a trust or are ready to begin the process of designing a comprehensive estate plan, contact our office to schedule a consultation.
About the Author
Leslie has been practicing law since 2009 and is the host of the estate planning podcast 'Legacy Purse'. She has a long history of representing family members struggling to inherit property and/or wealth from deceased family members through the Probate Courts. Knowing how time-consuming and expensive the probate process is, Leslie takes great pride in helping her clients learn how to plan and protect their families during their lives so they can avoid the probate court process and save their loved ones that additional grief (and expense).