When I am talking to friends, colleagues and potential clients, they often tell me that they don’t need an estate plan because they don’t have enough money to reach the estate tax exemption ($5.45 million per person in 2016). What is distressing to me is that individuals with estates worth one million dollars or less (this is the gross estate not taking into account any debt) have so much more to lose when they don’t have an estate plan in place. Here are some reasons why:
- Probate fees. If you have $150,000 in property in California – so anyone from Oakland to Livermore to San Jose to Walnut Creek with a house meets this requirement – will be headed to probate. Probate fees cost 8-10% of your gross estate. So if your total estate, not considering debt, comes to about $800,000, your estate could be paying up to $80,000 in probate fees. Wouldn’t you rather that money go to your family?
- Probate time. The probate process in California can take 6 years or more to complete. During this time, your family has to deal with lawyers, court, judges, appraisers, and other strangers in their lives. Plus, the property cannot be transferred during this time, so your family waits all these years to get access to the estate you left them. With an estate plan, there is no delay at all.
- Ease of transfer. The probate process is difficult, frustrating, time-consuming and very expensive. Without an estate plan, you force your family to go through it at a time when they should be taking care of themselves and each other in the wake of the tremendous loss. Generally we pick our closest family member to administer our estate. Why wouldn’t we make that administration as easy as possible for them?
- Emotional difficulty of probate. In addition to the fees, the time and the difficulty, the length of probate doesn’t allow our family members to move on after a death. We all have our own processes for dealing with grief and death, and some take longer than others. But the seemingly-endless probate process means that your family can’t get past the loss until the court says they can. This allows for more time to get angry, to fight with other family members, and be held back in their own personal growth. In life we support the growth of our families; why would we want to hold them back in death?
Come back tomorrow for the final three critical reasons you need an estate plan, even if you think you don’t!