When it comes to our estate plan, many of us think we’ve got it all figured out. We’ve got a simple will, our loved ones are on titles to all of our assets, and we’ve even added them to the bank account. We think we’ve avoided both significant legal fees and exposure to probate costs and estate taxes. However, although we think our plan is foolproof, in reality it is not. Let me share one recent experience that illustrates this line of thinking.
Recently I met with a client in their mid 90’s. The client’s children set up a meeting to discuss estate planning and how best to avoid large costs. This individual’s spouse had passed away several years ago. The estate is modest but is large enough to cause family members concern about exposure to tax liabilities or significant probate costs.The meeting was very interesting; the client had obviously thought about the estate and had taken steps that the client thought would remove any issue. The client, in fact, seemed a little annoyed at even being in our office. The client’s first statement was that they had a Will and that because there was a Will, no probate would be necessary. “My will takes care of everything,” the client informed me.”In fact, even though you have a Will, your estate is still subject to probate,” I responded. I discussed how we could open an informal probate with the court, and how the cost would depend on whether there were significant issues during the probate such as disagreements between beneficiaries. I explained that we do our best to keep costs low, but that it is often hard do control those costs. The client acted surprised; for decades the client felt that the Will, along with the sticky-notes on the back of paintings and heirlooms, was enough.Next, the client suggested that all of the money and land would be gifted to the children before death so that no tax liability would attach later on. Again, the client’s hopes were dashed as we explained that a gift tax could apply.”Whether you give gifts to your children, or allow your estate to go through probate, your estate may be exposed to significant costs,” I explained. “Don’t say the word Probate anymore…I don’t like it!” the client exclaimed. The client then asked what could be done to save money and avoid problems.I explained that by putting up relatively less money up front, the client could avoid probate costs and exposure to tax liability for the children in the future. The best way to do this, I explained, was by setting up a Revocable Trust. I described how the client would be the Settlor and the Trustee while the client was alive, and that a successor Trustee would administer the estate according to the client’s wishes upon the client’s death. I also explained that by establishing a Trust, the client would be able to avoid probate costs and exposure to significant tax liability. After feeling like there was no way out, the client realized that a small investment of legal fees in a Trust now would save a significant amount of money later. The client was relieved and satisfied, and asked us to begin work on a Revocable Trust.This experience is only one example of an individual who thought that they had their estate plan in place only to find out that in fact they were exposed to significant costs. If you are unsure about whether your plan protects your estate according to your wishes, contact our office at 719-687-2328 for a complementary planning session.-Jon* This is not considered legal advice, and the legal system constantly changes. If you want current and accurate legal advice, please contact our office and arrange to speak with an attorney. 719-687-2328