The only thing I need is a simple will.
When we pass away, there is a process created hundreds of years ago called the probate system. Probate helps to limit fraud and theft—to keep the servants from plundering or taking over the Lord’s castle. Back in the day, the surviving children would take a will down to the local judge, who might also be the local butcher or hardware store owner. This person probably knew the family and could quickly verify the documents with little delay, publicity, or cost.
DELAY: Now we have a backed-up court system that reviews probate along with foreclosures, criminal cases, and other cases. We also have to give creditors a chance to stake a claim. This creates a four-month minimum delay in probate. If there are any disputes, it can take as long as a year for the inheritance that parents have left to be distributed their children. In the meantime, there is a statutory provision for some family allowances, but it will not afford the standard of living most families have become used to.
PUBLICITY: Creditors need to have a chance to get their due. In most cases, the personal representative has to publish a notice to potential creditors in a local paper. So far, courts have outweighed the rights of personal privacy in favor of creditors.
COST: This process can also be costly. We are fortunate in Arizona that the court fees are relatively low ($400 if not contested), but probate lawyers and executors are still charging hourly or packaged fees that can quickly add up. In Florida, probate fees can chew up 6-10% of the total estate: the house, the furnishings, the silverware, and all other worldly belongings.
Fortunately, there is a beautiful system that can help folks completely avoid probate. It is called the Revocable Living Trust. When someone dies, anything they own in their own name has to go through the probate process. However, if they die and they don’t own anything in their own name, there is no probate of their estate. The state allows you to avoid probate by creating a Revocable Living Trust, while you are alive, so that you can move all your assets out of your name and into the trust. When you die, your trust owns everything. The trust is called a living trust for a reason: it never dies, so it never triggers a probate. We can pass items from parent to child in a matter of days or weeks instead of months.
This post is authored by local Phoenix Estate Planning Attorney, Heidi Thompson of Lifeguarding Legacies, PLCC. Find out more about Heidi at www.lifeguardinglegacies.com