Clients sometimes come to me hoping to set up their estate in a way that will avoid probate after their death. Occasionally, especially if they have limited assets, this can easily be done, such as by created a lady bird deed for a home that adds another person to the deed. Often, though, especially with more complex assets, this would typically involve creating a revocable living trust. While there are some people who can benefit from doing this, usually people’s fears of probate are way overblown.
Here are the major concerns I typically hear and why you shouldn’t worry about them:
- Taxes. While there is a federal estate tax on the books, it applies only to estates worth more than $5 million. If your assets don’t total that amount, your heirs will not pay taxes on what they inherit from you.
- Privacy. It is true that wills deposited with the court are public property while trusts don’t need to be filed. In theory, then, anyone can see who you have left your estate to. In reality, though, unless you are a famous person it’s unlikely anyone is going to bother trudging to the courthouse to peek at your file.
- Fees. There are costs involved with a probate–court costs, attorney fees, and the like. But setting up a revocable living trust also has fees attached to it, and they are much more than the cost of drafting a will.
Here are the biggest downsides to trying to avoid probate with a revocable living trust:
- Documentation. The original trust is not filed with the court, and so can easily be lost over the years. Without that document, proving a person is the successor trustee (and entitled to the deceased person’s assets) is impossible. I have had several clients over the years who swear they are the successor trustee, but since the original trust had been drafted decades earlier and no one could find it they were never able to locate it.
- Trust not properly “funded.” After creating the trust, and after each asset purchase thereafter, the trustee’s home, cars, bank accounts, stocks and other assets must be placed into the trust. So many times a trustee passes away and one or more assets is discovered to have remained in their own name. That asset can only be disposed of by–you guessed it–starting a probate.
This is not to say no one should create a revocable living trust. But in my experience most people should instead create a valid will (with an attorney, so there are no mistakes that can’t be corrected after you pass on) and not worry about their heirs needing to go through the process of probate.
If you have a will or have been thinking of creating one, don’t forget to also have your attorney draft these other, equally important, documents in the state of Florida:
- Health Care Surrogate. If you’re in a hospital too sick or unconscious to make treatment decisions for yourself (Should you have surgery? One type of medication or another?), whom do you want to be making them for you? This isn’t always as straightforward as it seems—while most people select their spouse or grown child, if your partner suffers from severe depression, say, or your kid lives across the country, you may do better selecting a friend or other relative. This should be a person who knows you well, so they can deduce what types of interventions you would desire if you were able to make these decisions.
- Living Will. Doctors like to do all they can to save patients near death, which sometimes includes performing CPR or putting them on a ventilator. If you become terminally ill, however, you may prefer to be treated only for pain, and not to be aggressively or artificially kept alive. A living will—also called an advance directive—notifies your doctor of what you desire. (Note that this is different from a health care surrogate, because this covers only end-of-life decisions.) Doctors can use your living will to determine, for example, if they should put a “do not resuscitate” order in your chart.
- Financial Power of Attorney. This person can act in your place financially—withdrawing your money, signing contracts binding you, and, depending on how the POA is drafted, even selling your home. Until a few years ago, you could create a “springing” POA, which took effect only if you became very ill. Changes in the law now mean that as soon as you sign the document, the person has power over your money and possessions. I advise clients to create this only if they are very elderly or sick, and have someone they trust completely. I’ve seen cases where a POA has been valuable in ensuring that an ill person’s bills are being paid or the home they can no longer live in is sold, but I’ve also seen unscrupulous POAs used to clean out bank accounts and pocket the money. A frank discussion with your own family and then with your attorney will help determine if this is right for you.
Attorneys typically draft these documents in a package along with your will, to keep your costs down. Contact The Law Office of Gary Landau at 954-979-6566 to discuss which documents are right for you.
The death of the musician Prince is more than just a tragedy of a brilliant life cut way too short. It’s also a reminder that anything can happen at any time, and a cautionary tale for all of us about the importance of drafting a will, no matter how far off death may appear.
According to an article in the New York Times, Prince, who died at age 57 and had no spouse or children, died without a will, a situation legally known as dying intestate. And before you say, “I don’t have the assets that he had,” know that dividing up dollars is not the only benefit a will provides.
If you don’t currently have an updated will, consider drafting one. Here are some reasons why it could be important:
1. A will says who will be the executor of your estate.
The executor is the person in charge of handling the legal process, or probate, after your death. A good executor, who in Florida is called a personal representative, works with an attorney to ensure that your estate is divided up quickly and fairly; a poor one can delay or prejudice the process and stoke friction within the surviving family.
2. A will names the guardian for your children.
If you’ve got young children, having an updated will is crucial. This document names the friend or relative you want to take care of your kids, known as their guardian, until they turn 18, a designation that keeps grandparents or siblings from battling it out after you’re gone. And if you drafted a will and named a guardian when your children were tiny and now they’re teens, take another look to see if the guardian needs changing. When my kids were little, we named my wife’s sister in another state as their guardian, because she was raising kids of her own; once our kids became teens, it made sense to switch it to their local grandparents, so they wouldn’t be uprooted from their friends and school if tragedy struck.
3. A will lets you decide where your assets are going.
Of course, the biggest reason you should have a will is that, without one, it is state law, not you, that dictates who gets what. You may want your best friend to get your new Lexus, for example, but the law states that without a will your assets go to your closest relatives–even if you haven’t spoken to them in years.
If you would like to speak with an experienced estate planning attorney, please contact us at The Law Office of Gary Landau, P.A. Our office is conveniently located in Coral Springs, Florida.
The Law Office of Gary M. Landau, P.A.
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Gary M. Landau, Esq.
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