First, here are some of the important terms in estate planning: Living Trust - a trust set up during a person's lifetime (during which the trust may be changed or revoked) to avoid probate.
Probate - the legal process by which a will is proved to be valid and binding (can be a lengthy and expensive process).
Will - a formal legal document directing the disposition of assets upon death.
Why it is important for an estate to avoid probate: In the May 2008 American Bar Association Journal an attorney in Chicago says: "Probate in Illinois is relatively painless, so long as there is no litigation associated with it. Probate requires only two court appearances, and the decision-making does not require court approval, so long as there is no litigation or upset heirs interfering with the administration of the estate." There can easily be totally unexpected upset heirs interfering with the administration of the estate. And even just paying an attorney's hourly rate for two court appearances and various court filings can cost heirs a great deal of money.
Probate fees can take a big bite out of a small estate: Attorney's and executor's probate fees are set by law in some states, such as in California. The estate's attorney in California will be paid $13,000 for a small estate of $500,000, which with California housing prices is a small estate. And if the executor doesn't waive the fee, he or she will also receive a fee of $13,000.
For an estate that might consist of only a small residence there can be $26,000 in fees! Plus court filing fees, probate referee fees, certified copy fees and aggravation too much to mention.
Privacy issue - probate is a public process: Another problem with probate is that it is a public process. Anybody who wants to can read a will as it becomes part of the records of the courthouse. If there's a contentious relative being left out of a will, or if privacy is valued, probate should definitely be avoided.
A living trust solves these problems: What is needed so that an estate doesn't have to go through the legal obstacles of probate? A will is not enough to avoid probate. A living trust is needed.
A living trust has the same instructions for the disposition of property that would be expected in a will. But since the trust is a pre-existing legal entity, it continues after death. Therefore, the estate does not have to go through probate since there are no assets that have to be "proved."
Pour-over will takes care of any assets not transferred to the trust: In case there are any assets that have not been transferred to the trust, a will is still needed. For example, the proceeds of a wrongful death lawsuit would be picked up by the will because these proceeds didn't exist at the time the trust was set up. The will is known as a "pour-over" will because the will "pours" everything it covers into the trust.
The above information is only considerations for you to discuss with your own estate planning attorney; the information is NOT legal advice. The providing of this material does not establish an attorney-client relationship.
Federal and state law possible changes:
- State and federal laws are constantly changing, both because Congress and state legislatures make changes and because the courts render decisions that affect tax-saving or estate-planning techniques.
- For example, in 2009 the federal estate tax exemption is scheduled to go to $3,500,000. In 2010, estate taxes may be repealed altogether. On the other hand, there is a good possibility that estate taxes may be raised in 2009. Does an old estate plan provide the flexibility to deal with any of these possibilities?
Possible changes in personal circumstances:
Here are some of the possible changes in personal circumstances that could affect how current are your estate planning documents:
- You may have had a new child, or you may have decided to change who you named as the guardian of your children.
- You may have gotten divorced or remarried.
- You may have received an inheritance, putting your estate into a range where some advanced estate planning techniques would be a benefit.
- You may have bought a different house or commercial property and forgotten to transfer that new property into your existing trust.
- You may have finally decided who gets Uncle Harry's coin collection or Grandma's china.
- There can be any number of other changes that can affect your current estate plans.
Difficulties of going through a review of estate planning documents: For many people, making the decisions required for estate planning documents is difficult. Considering scenarios that can be uncomfortable are often required in order to make these decisions. So when a client has finally signed his or her estate planning documents, there's a big sense of relief - as well as the desire not to think of these decisions again.
But there are consequences of not reviewing estate planning documents every few years: A surviving spouse or heirs can be in deep trouble if estate plans are not reviewed every few years or when a personal situation changes. It's important to keep estate planning documents current to save loved ones from avoidable problems.
The above information is only considerations for you to discuss with your own estate planning attorney; it is NOT legal advice. An attorney-client relationship is not established by the providing of this material.
Mitchell Miller has sinced written about articles on various topics from Legal Matters, Estate Planning and Legal Matters. Watch the short free video on Mitchell R. Miller's information site at http:// to learn why an estate plan needs to be review. Mitchell Miller's top article generates over 90500 views. to your Favourites.