I remember many years ago as a young man when I was selling insurance and investments for Prudential-Bache, the manager told us that we would probably be selling to people within a minus or plus ten years of our current age.
As I have gotten older over the years, I have found some truth in this axiom. Most of my clients today, not all, are within a minus or plus ten years of my age. And as I and my clients have gotten older, our focus on things we thought important earlier in life, have changed. Let’s take for example estate planning.
When I started out with Prudential in my mid-twenties, I was mainly selling to young married couples. We discussed education for the children, financial security for each spouse, having the mortgage paid off at death, having a will, and yes, even retirement planning.
Estate planning was not their favorite subject as it seemed to them they had many years ahead of them before they seriously needed to be thinking about such things. And yet, most people I talk to today (plus or minus ten years of my age) are concerned about estate planning, i.e., wills, trusts, and probate, as they begin to downsize and plan for their eventual death.
Unlike those young clients of mine during my Prudential days, today, these older folks are interested in estate planning. Many do not know where to begin. Some think having a will drawn up by a lawyer, will solve most of their problems, not realizing that probate could be a profit center for lawyers.
You may be asking, “What is probate?” Let me explain.
When a person dies with a will, the will is brought to the local court. The court must verify that the will is authentic, properly signed and was drawn up according to state law. Property is inventoried and appraised, creditors and relatives are notified and a notice is published in the local newspaper where the deceased person died.
Creditors are paid from the cash in the estate. If there is not enough cash in the estate to pay creditors, then other hard assets like cars, stocks and bonds, or even the home, must be sold, and converted to cash to pay the creditors.
This whole process, which is called probate, and could take up to a year or more for the remaining property to be distributed to the heirs. As I said earlier, probate could be profit center for lawyers. How so you may ask?
While the cost of probate varies from state to state, it has been estimated that the cost of an attorney to probate your estate, court costs and other fees, can eat up as much of 5% of the value of the estate. If you die with a $300,000 estate, probate alone could cost as much as $15,000. If you have a $500,000 estate, probate could cost as much as $25,000. Are probate costs a waste of money?
Keep in mind, probate costs do not include federal and state taxes (if any) based upon the size of the estate. Probate cost might be justified if the process really did something for the family. But in most instances, there is no need to be in court.
Over the next several weeks, I’d like to share with you how you can avoid some, if not all, probate costs. Keep in mind, that I am not a lawyer and I am not attempting to give you legal advice.
In the meantime, if you would to discuss your personal situation, feel free to give us a call at 252-257-4822. If you do need an attorney, depending on where you live, we could put you in contact with one.
In the meantime, if you would to discuss your personal situation, feel free to give us a call at 252-257-4822.