Some people think that a will is the only document that you should consider using when you are planning your estate. They are under the impression that the executor that you name in the document will follow your instructions and distribute assets to the beneficiaries.
This seems like a very simple and straightforward process that is between the decedent and the executor. Why would there be any expenses to consider? In reality, this is an oversimplification, and we will look at the matter in this post.
When people pass away, they typically have debts, and creditors have a right to be paid. If someone thinks that the will is not valid for one reason or another, they should have a forum within which they can make a case.
There is also the matter of oversight that protects the people that are named as inheritors. What if the executor plays favorites unscrupulously? For these reasons and others, the process of probate is in place.
Under Ohio state laws, the will must be admitted to probate, and the court provides supervision while the estate is being administered. Anyone that wants to contest the will can come forward during probate, and creditors are notified so final debts can be paid.
Probate is not free by any stretch of the imagination. There is a filing fee that is charged by the court, and the executor is entitled to payment. In many cases, the executor will bring in a probate lawyer and accountant, so there could be legal and accounting fees.
These legal expenses will be multiplied if there are any complications, and a contested estate would certainly fit into this category. The property must be prepared for distribution to the heirs, so there can be appraisal and liquidation charges as well.
All of this red ink will consume a noticeable portion of an estate. A study that was conducted a number of years ago determined that on average, between three percent and seven percent of the value of an estate is consumed during probate.
The cost factor is not the only probate pitfall. You probably want your final affairs to be conducted in private, but privacy is lost when you use a will to express your wishes. Probate is a public proceeding, so the records are available to anyone that wants to access them.
Time consumption is another significant negative. No inheritances are distributed while the estate is being probated by the court, it will usually take eight or nine months at minimum.
You could use a revocable living trust if you want to steer clear of these difficulties. While you are alive, you would act as the trustee, so would have total control of the assets that you transfer to the trust.
Along the way, you can change the terms as you see fit, and you retain the right of revocation. You can actually rescind or dissolve the trust if you choose to do so, and you would reassume direct personal possession of the property.
There are no risks, and there are considerable rewards. When you are drawing up the trust declaration, you name a successor trustee to administer the trust after your passing. They would follow your instructions and distribute the assets to the beneficiaries in accordance with your wishes.
The probate court would not be involved at all, so the administration process would be simplified and streamlined. This is one of the major benefits of a living trust, and there are others that we will cover in a future post.
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Today is the day to end the procrastination if you are going through life without a plan. You can schedule a consultation at our Cincinnati estate planning office if you call us at 513-721-1513, and you can use our contact form to send us a message.