A recent article on wealthmanagement.com discussed how most Americans’ inheritances go through probate due to lack of preparation through an estate plan. From the article:
“Surveys confirm that avoiding probate is the primary reason that clients engage in estate planning today. Yet, the estates of the majority of Americans will go into probate.
In March 2014, Trusts & Estates published the findings from the 7thAnnual Industry Trends Survey conducted by WealthCounsel and WealthManagement.com. The survey looked at the business challenges of estate-planning professionals and provided insight on what motivates clients to engage in planning. The survey found that the top three reasons that clients engage in planning are to:
(1) avoid probate (59 percent)
(2) minimize discord among beneficiaries (57 percent)
(3) protect children from mismanaging their inheritances (39 percent)
Yet, in spite of the survey results indicating that probate avoidance is foremost in the mind of those who engage in planning, the bad news is that the majority of Americans don’t plan because they lack awareness as to why they should.
Estate Planning vs. Probate
Here are a couple of beneficial reasons why you should engage in estate planning:
#1: Time
The probate process can be very time consuming. We refer to the amount of time it takes to fully administer the estate, and the amount of time the personal representative has to take in order to fulfill all of their duties. On average, it takes between six months to one year to fully administer an estate. The length of time depends on the complexity of the estate and the assets that the representative needs to transfer.
The personal representative is normally a surviving spouse, child, or beneficiary of the estate. They have their own lives, children, and jobs to deal with. Taking on the responsibility of being the personal representative is like a second job. Documents need to be signed and matters need to be dealt with in court, sometimes in which they have to appear personally.
#2: Economic Benefit
The probate process can be very costly to the heirs. Most probate estates require the assistance and guidance of an experienced probate attorney to assist the personal representative in administering the estate. Legal bills can rack up quickly and cut into a significant portion of the assets of the estate. If the estate finds itself in any litigation, the legal bills can really start piling up.
Planning properly can potentially save heirs thousands of dollars in attorney’s fees. Based on your individual situation, there are various planning techniques you can use to avoid probate. These techniques can include trusts, gifting, and titling of assets.
A common misconception is that estate planning can be very expensive and is only for the wealthy. However, this is in fact not the case. Not everyone needs a trust — but as discussed above, there are other affordable planning techniques that can be used to avoid probate.
#3: Privacy
When an estate goes through probate court, these court records are public. This means that creditors and family members can challenge the will, complicating an already lengthy proceeding. With proper estate planning, you can avoid this situation from happening altogether. An estate planning attorney can help keep these specifics out of public record:
- The total estate value
- Estate documents
- Beneficiaries