Many people call me and ask, “How much is a will?” Inevitably I have to ask them a number of questions. Some people really don’t need a will. Some people would be best served by creating a trust. Some people should be using will substitutes such as transfer on death deeds, beneficiary designations, or other techniques. Some clients tell me, “I don’t really have an estate.” What they mean is that their assets are modest. But they do have assets. They are worried about how much a will costs, but what they should be focused on is developing a solid plan.
A plan can save their heirs a probate. In the Red River Valley, if at the time of my death I am the sole owner of any real estate, a probate is required. Our office cannot finish even the most simple probate for less than about $4,000. This is because the fixed costs (filing fees, recording fees, certified copy fees, sale fees, etc.), together with the minimum amount of time it takes (about 15 hours), drive the costs so high. But if one had a plan that used a probate alternative (such as a trust, a transfer on death deed, a life estate/remainder deed, or a gift deed), in many situations that eliminates the need for a probate. Keep in mind that most deeds cost less than $300 to draft and $46 to record.
A plan can make things much easier for your surviving spouse. An estate planning attorney can help you situate your accounts, retirement, and land in a way that makes the transfer of your assets to your surviving spouse an easy and smooth process.
A plan can address the needs of your heirs. Not every heir is good at handling money. Not every heir is mature enough to prudently use an inheritance. An estate plan can make provisions for this and customize your estate documents to meet the needs of your heirs.
A plan can keep assets in the family. Without a plan, there is an increased risk that the assets you’ve worked for could end up owned by a former spouse of one of your heirs, whether it is caused by death or divorce.
A plan can save the heirs significant estate tax. Depending on your assets, your heirs may be exposed to roughly 10% state estate tax. In rare occasions, they will also pay roughly 50% in federal tax. But if assets are balanced between spouses, and if business or farm assets are properly held, often tax can be completely avoided or at least greatly reduced.
A plan can preserve assets from potential Medical Assistance (Medicare) claims. Because of the five year look back rule, waiting until Mom is in the nursing home almost never works as a Medicare asset plan. But if one plans ahead and works with each asset, often all or most of the family legacy can be preserved, while at the same time leaving enough funds to take care of a loved one in in long-term care.
Make your 2021 resolution to visit a qualified estate attorney and make a plan.