What Kind of Estate Plan is Right for Me?

The short answer is: It depends.

Filed in Estate Planning, on July 18, 2017

The first question I ask during an estate planning consultation is “what are your estate planning goals?” Seven out of ten times, clients are not even aware that they should identify what their goals are, or just cannot articulate them. The other three out of ten times, the answer is “I want to avoid probate.”

Avoiding Probate

Many people want to avoid the court process known as probate. When a person dies with a will alone and his or her estate includes real estate, assets in excess of $100,000, or other probate assets, his or her executor is required to open a probate estate in court. A probate estate allows the court to supervise the distribution of assets to ensure beneficiaries obtain their inheritances. In many cases, this requires the executor to appear in court or hire an attorney to appear in court for him or her. This translates into either time taken off work or spending a portion of the estate on attorneys fees. A probate court process takes time and is open to the public.

Many people believe the only way to avoid the probate court process is to put all of their assets into a trust. Utilizing an estate plan consisting of a pour over will with a revocable living trust is one way to avoid the probate process. This estate plan is generally more expensive than a will because it requires preparation of several documents. But this is not the only way to avoid the probate process.

What is in Your Estate?

For many seniors, the “big ticket items” in their estates are their retirement accounts (401k, IRA, pension, etc.), their homes, and some bank accounts. Some also have investment accounts as well. I tell many that while I would love to prepare an expensive will and trust estate plan for them, in many cases, it is not necessary. Your retirement accounts usually have a designated beneficiary, which means they are not part of your “probate estate” requiring a court process. In Illinois, homeowners can transfer their homes to beneficiaries through a “transfer on death instrument” which takes the home out of the “probate estate” and passes it directly to the beneficiaries without a probate court process. Many banks and investment brokers offer accounts or investments which are “payable on death” which, again, allows the account owner to pass the account to designated beneficiaries outside of a probate court process.

Many seniors with more extensive assets in their estates do need a revocable living trust in order to ensure they can take advantage of generation skipping transfers, marital exemptions on the estate and other estate planning techniques that consider tax benefits. Some people need estate planning that anticipates nursing home care in the future. It is important to know that “one size estate planning” does not fit all. Make sure to discuss your goals with an estate planning or elder law attorney.

Comments (1)

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September 21, 2017 at 1:47 pm

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