While creating a plan for the division of assets at the time of death is usually the primary objective of an estate plan there are numerous secondary objectives that can be included in a comprehensive estate plan as well. The secondary objectives that you choose to include in your estate plan will reflect your individual circumstances; however, a common objective of estate planning is probate avoidance. One reason why people try to avoid probate is the costs involved in probating an estate.
If you have worked, saved, and invested throughout the course of your lifetime to amass enough assets to both support you during your golden years and pass some down to loved ones then you undoubtedly want to protect and secure those assets. Unfortunately, failing to create a comprehensive estate plan can result is losing some of those assets when you die. On way in which your estate can lose assets is through a gift and estate tax obligation. In fact, your estate can lose a significant portion of its value to gift and estate taxes without careful pre-planning. Taxes, however, are not the only threat to the value of your estate. Probate costs can also diminish the value of your estate if you failed to plan ahead.
Although you may not be able to completely avoid probate, you can significantly reduce your estate’s exposure to the probate process by creating a comprehensive estate plan. As a general rule, the longer your estate spends in probate the higher the costs incurred by your estate. Those costs may involve the following:
- Filing fees and court costs
- Executor or personal representative fees
- Attorney fees
- Appraiser fees
- Certified Public Accountant fees
- Investigator fees
- Asset maintenance costs
Each one of these costs is charged to your estate and paid out of estate assets. The longer the probate process draws out the more costs that are incurred. Your executor, for instance, will charge a much higher bill if he or she is required to spend two years probating the estate than if the estate can be probated in less than six months. Likewise, the costs associated with maintaining assets, such as real property, go up with each month that passes.
By creating a well thought out estate plan you can dramatically reduce your estate’s exposure to probate, thereby limiting the costs associated with the probate process. While bypassing probate altogether may not be possible, you can likely limit the number and value of assets remaining in your estate when you die. By doing this, you will decrease the amount of time, and money, required to probate your estate.
- How Tax and Non-Tax Considerations Impact Estate Planning – Part II - May 25, 2023
- How Tax and Non-Tax Considerations Impact Estate Planning – Part I - May 18, 2023
- The Joy in Joint Trusts - May 11, 2023
