Father’s Day is a day that we take a trip down memory lane, reflecting on all the happy moments we’ve shared with our dads and father figures.
Whether you plan to host a cookout, play a round of golf, or send a handwritten card in the mail, this Father’s Day, take time to start a conversation about estate planning.
When folks hear “estate planning,” they often think that you must be near the end. This isn’t the case at all! Estate planning helps ensure your family’s future is safe and secure. No matter your age or your health, estate planning is an intelligent and proactive step toward shielding your family from the hassle and expense of probate.
Need help with estate planning?
Are you a California resident in need of estate planning guidance? Reach out to our team today to discuss your situation and explore how we can help.
What is probate?
Probate is a legal process that takes place after someone dies. It includes:
- Proving in court that a deceased person's will is valid (usually a routine matter)
- Identifying and inventorying the deceased person's property
- Having the property appraised
- Paying debts and taxes, and
- Distributing the remaining property as the will (or state law, if there's no will) directs.
Why do I need to avoid probate?
Most of us understand that probate is a lengthy, cumbersome process, but many folks don’t necessarily know why. However, if you die without a properly executed estate plan, your family may have to go to probate court.
Here are some good reasons why you’ll want to avoid probate:
- Probate is time-consuming. It’s not uncommon for your property to be tied up for months or years while a probate court finalizes an estate, especially if it's complicated or involves a contested will.
- Probate is expensive. Costs vary from state to state, but in general, probate demands executor fees, attorney costs and a litany of administrative expenses, like appraiser's fees. These charges accumulate quickly and will continue to add up as the process drags on.
- Probate is public. Probate is a state legal proceeding. That means probate files are public records that anyone can read. And with modern technology comes the ability to locate information about a decedent's estate online, and in most cases for absolutely free.
How much does probate cost?
Probate fees vary from state to state. Both the lawyer and your executor will be entitled to fees from your estate.
Your executor may waive the fee, especially if he or she inherits a substantial amount of your property.
In many states, probate fees are what a court approves as "reasonable." In a few states, the fees are based on a percentage of the estate subject to probate.
Other probate costs
In addition, there are court costs, appraiser's fees, and sometimes other expenses
California Statutory Compensation for Executors and Attorneys
Both the attorney and the personal representative are paid under this statute. So, if both the attorney and the executor elect to receive a fee, the amount paid will be double that shown below.
Value of Estate
Total Executor and Attorney’s Fees
$23,000 x 2 = $46,000
$28,000 x 2 = $56,000
$33,000 x 2 = $66,000
$43,000 x 2 = $86,000
$53,000 x 2 = $103,000
$63,000 x 2 = $126,000
$73,000 x 2 = $146,000
$83,000 x 2 = $166,000
$93,000 x 2 = $186,000
$103,000 x 2 = $206,000
$113,000 x 2 = $226,000
$138,000 x 2 = $276,000
$163,000 x 2 = $326,000
As you can see, it makes more sense to try and avoid probate altogether. At the very least, consider reducing the amount of property that will be subject to probate — this will reduce fees and ensure that your beneficiaries get some of their inheritance faster.
How can I avoid probate?
In terms of long-term value, creating an estate plan is one of the best moves you could make for your family.
Without an estate plan, your loved ones will need to deal with probate. You'll also run into some major issues:
- You cannot choose who receives your assets, how much and when.
- If you have minor children, you cannot choose the main guardian for the children if something were to happen to both parents/guardians.
- You also cannot choose your executor (the person to carry out the closing of your estate).
- All your assets — house, savings, retirement plans, and so on — will pass to your heirs at law as specified under your state’s statutes.
Estate Planning Checklist
When it comes to estate planning, the biggest hurdle you’ll need to overcome is your reluctance to consider your mortality. It may help to focus on the fact that you’ll be sparing your family the hassle and expense of probate! You can leave items to people in your will or via a living trust, or you can give them away while you are still alive, but whatever you do you must make the plans now while you’re alive and well.
Take stock of your assets.
Everything you own is considered your estate. Start taking inventory of the following:
- Your home value (and other real estate).
- Your high-ticket items - cars, jewelry, artwork, and other physical assets.
- Recent statements from your bank, brokerage, and retirement accounts.
- Record the location and contents of any safety deposit boxes or safes.
- List your insurance policies, noting their cash values and death benefits.
- List all liabilities, including mortgages, lines of credit, and other debt.
Draft your estate plan
Meet with your estate planning attorney, Fiduciary Financial Advisor, and CPA to discuss these important questions about your estate:
Who should be responsible for distributing your assets?
Put your plan into action
Your estate planning attorney will help you draft:
- Your will
- Your medical power of attorney (including an advanced directive, if desired)
- Your financial power of attorney
- Disposition of personal property
- Disposition of final remains
- Any trust documents, if applicable
Some important reminders:
- If you set up a trust, fund it promptly. If you don't, the agreement won't take effect, and your assets may not pass to your beneficiaries as you intended.
- Review and update the beneficiaries on all of your investment accounts annually.
- Make sure that all assets that you want included in the trust are retitled to reflect this ownership change, and that you keep copies of the relevant documents.
Revisit your estate plan annually
Review and update your documents and accounts annually as your situation changes or as current laws change. Beneficiary designations are notoriously forgotten in the chaos of day-to-day life! Keep those up to date — especially after a major life event, such as marriage, divorce, birth or adoption, or a significant change in financial situation — so that your assets will be distributed according to your wishes.
Additionally, sometimes changes to laws (like the federal tax code) can impact the structure and most advantageous tools for estate planning. Make sure your current estate plan aligns with the most current laws.
We Can Help
With Father’s Day nearing close, it’s a good idea to talk about your plans for the future and how best to protect your family.
If you have any questions about starting or updating your estate plan, please fill out the form below. We look forward to speaking with you.
DISCLAIMER: Advisory Services offered through Prosperity Financial Group, Inc., an Independent Registered Investment Advisor. Securities offered through Fortune Financial Services, Inc. Member FINRA/SIPC. Prosperity Financial Group, Inc. and Fortune Financial Services, Inc. are separate entities.