By Jim Jones
“Planning is as natural to the process of success as its absence is to the process of failure.”
~Robin Sieger, author of Natural Born Winners
Everyone has an estate plan. Your current plan either benefits your family or benefits lawyers and the government. Which plan do you have?
Using a few legal documents, self-storage operators can create an effective estate plan, and prevent up to 50 percent of their estate from being lost to unnecessary probate costs and wealth-destroying “death” taxes.
What Is Probate?
Probate is the legal process by which a court distributes the assets of a deceased person according to the last will and/or state law. The court first determines the validity of the will, and then resolves all claims from creditors and competing claims from heirs.
There are three main reasons why you want your estate to avoid probate:
- It’s expensive. Up to 10 percent of your estate can be lost to probate costs alone. Costs may include court fees, legal fees (to the executor of the estate or to resolve disputes), appraisals and accounting services.
- It’s a lengthy process. While it’s possible for an estate to be “probated” in six to 12 months, it’s also common for the process to take years.
- It’s an invasion of privacy. Your entire estate will become a matter of public record during the probate process. Anyone can go to the courthouse and learn what assets are in the estate, their value, and to whom the assets are to be distributed. There are instances of dishonest people searching probate records trying to identify and claim the assets of an estate.
Why Some Attorneys Recommend a Will
Many attorneys recommend their clients create a will without a living trust. This ensures the estate will go through probate. Why? Because attorneys don’t always have their clients’ best interest in mind. The attorney wants to collect the legal fees associated with probate and, in some states, the attorney receives a percentage of all the assets that go through probate. Probate is time-consuming, costly and public. The only person that benefits from your estate going through probate is the attorney.
Can You Use Joint Ownership to Avoid Probate?
You can avoid probate by holding assets in joint ownership, but there are several problems with this approach. For example, a couple built a farm worth several million dollars. An estate planner advised them to own the farm in joint ownership with their four children to avoid probate. A few years later, the parents and one of the adult children were killed in a car accident. The farm did avoid probate, since the assets went to the three surviving children as joint owners, but the spouse and children of the child that died were disinherited.