- Posted on: Jun 15 2017
Many of us actually go out of our way to avoid learning anything about wills, trusts, and probate. That’s not surprising. Who wants to focus on what happens when we die? But it’s still important to know the basics because when others depend on you, you don’t want to be unprepared. Here, we are taking a brief look at some of the more common myths and misconceptions many people still have regarding wills, trusts, and probate:
Misconception #1: If you die without a will, the government gets everything.
If you have a spouse and/or children, you don’t have to worry about the state taking everything.
Each state has their own guidelines, but generally speaking, if you die before creating an actual will (or in legal terminology, if you die “intestate”), your spouse and kids will inherit your property and assets. If and only if no living relatives are able to be contacted, the state may get everything, but if your aunt’s long-lost grandson turns up, the state will not receive your property and assets.
However, if you want someone other than your spouse and kids to inherit any of your property or assets, you need to create a will or a trust. It’s never too early to do that – no one knows what tomorrow will bring. A simple will is easy to create, is not very costly, but don’t try to do it by yourself. If you own a business, investments, and/or properties, you may want to consider a living trust – which offers some special advantages – rather than a will. An experienced Washington, D.C. estate planning attorney can provide the advice you’ll need.
Misconception #2: The costs associated with probate will deplete the estate’s assets.
If you believe some of the nightmarish stories that are out there about probate, you might decide that your heirs won’t get a penny after the lawyers and courts are finished picking apart your estate. That’s a huge misconception. For many estates, no probate is required. If the value of a deceased person’s assets is not that large, a family can usually benefit from probate shortcuts, which tend to cost less.
However, if an estate needs formal probate, the cost is almost always less than five percent of the total value of the estate – with these two exceptions:
Litigation: If anyone contests the deceased person’s will or claims that the executor of the will has acted inappropriately, the expenses can skyrocket, especially if the dispute goes to trial and the estate is compelled to seek the services of a lawyer.
High attorney-fee states: In some states, attorneys charge a percentage of the value of the estate rather than a flat or hourly fee. Fees are calculated based upon the gross value of the estate, therefore in those few states, families may pay a great deal more than they would pay in states where attorneys charge flat or hourly fees.
Misconception #3: The probate process can take years.
It’s extremely rare for any estate to take more than a year to resolve. In most cases, the most common delay is the length of time that state law requires to allow creditors to submit claims. In some states, that period of time may be only weeks, but in no state is it longer than one year. When the period for creditors to file claims has passed, the estate can be closed once the personal representative of the estate has collected all of the assets and paid all of the debts and taxes. It may take several more months to put every detail together, however, many estates are completed in under a year.
Why, then, do some estates take longer? It’s usually for one of these three reasons:
There’s a family dispute: If siblings cannot agree regarding the division of a parent’s assets, or if another family member disputes the will, the matter may have to be settled by a court. Disputes inevitably mean more time and more expense.
It’s a large, complicated estate: If the estate is large enough to owe significant state and federal taxes, the estate will not be settled prior to when the estate tax return is due, 9 months following the death, and the most complicated estates can receive an additional six-month extension. However, fewer than one-half of one percent of all estates owe federal taxes, and only about twenty states impose state estate taxes.
Income is still coming in: The most complicated estates that take the longest to settle are those of deceased celebrities whose work is still earning income. Disputes regarding the estates of people like John Lennon and Michael Jackson can last for decades.
While probate usually does not drag on for years, it does take some time, and there are ways to avoid probate entirely. A living trust, like a will, transfers assets after your death, but with a living trust, your estate can avoid the probate process. Speak to an experienced Washington, D.C. estate planning attorney to determine if a living trust is right for you, your family, and your estate.
Misconception #4: The oldest child is entitled to be the executor of a parent’s estate.
The truth is that birth order is no advantage when it comes to serving as the executor (that is, the personal representative) of a deceased parent’s estate. If the deceased person named someone to be the executor, that is the person the court will appoint unless an extremely good reason like a felony conviction or a disability prevents that person from doing the job. If there is no will, or if the person named as executor cannot take or does not want the responsibility, the court will name someone.
Most states specify that a surviving spouse is first in line to be named as an executor, followed by any adult children. Siblings can agree to be co-executors, but candidly, it’s usually better to have one person responsible. If sibling co-executors fail to agree, delays can ensue, costs can skyrocket, and a court may have to resolve their dispute. If you are a parent creating a will or a living trust, naming an executor cannot be done casually or sentimentally. Pick a forthright, responsible person who can get the job done the way you want it done.
Misconception #5: My spouse and children may not receive anything after my death.
Especially in marriages where both partners independently own assets, they may agree to leave their assets to children, friends, or even to a charity. Spouses in second marriages may want to provide for children from a previous relationship, and that’s fine provided that the other spouse agrees. But if the other spouse has a change of mind after the first spouse dies, legal trouble may arise.
State laws vary; a surviving spouse may automatically receive a third of the estate, or a year’s support, or the right to live in the family home. In some states, the longer the marriage, the larger is the share of the estate that the surviving spouse can claim “automatically.”
Now that you’ve learned about some of the common misconceptions and misunderstandings regarding wills, trusts, and probate, you can start the estate planning process with accurate information and with confidence. Schedule a consultation with an experienced Washington, D.C. estate planning attorney if you want to learn more about estate planning or if you’re ready to begin the estate planning process.
Posted in: Estate Planning