Whats Best for You- A Will, Trust or Putting Your Kids Names on Your Home & Accounts?
You are not experiencing your best analytical moments if you think that letting the probate court handle your estate planning is preferable to creating your own plan. Only the uninformed believe that the probate court process is the best plan to use.
Should You Put Your Kids Names on Your Home & Financial Accounts?Joint Tenancy is frequently thought of as a "poor man's will" because the asset transfers automatically upon death to the people named on the title. Anytime that you put anyone else's name on your assets, their life becomes your life. Their lawsuits become your lawsuits. Their tax issues become your tax issues. Their divorces become your divorces. Their bankruptcies become your bankruptcy. You get the picture. Despite your well-intended desire to provide for that loved one, putting their names on your assets is probably not the best way to do it.
Furthermore, when you put someone else's name on a highly appreciated piece of real estate, what you are doing is creating a highly unnecessary tax problem. Let's say that you bought a piece of real estate in 1990 at a cost of $100,000.00. In the year 2017, you decide to put your child's name on the title as a way to transfer ownership upon your death with the intent to avoid the expense, time delay and public exposure of the probate court process. As the law currently stands, if you die in 2017 and your child sells the property which is then worth $500,000.00, your child will be required to pay capital gains tax on $400,000.00 worth of appreciation. With proper planning, your child could have avoided the payment of that tax entirely.
Would a Simple Will Suffice?Many people think that a Will avoids probate. Unfortunately, this is not the case. A Will simply avoids the assets going to the slate of intestate heirs selected by your state and instead passes to the beneficiaries that you designate. Unfortunately, anywhere you own real property you must have a probate. So, even if your state's probate process is simpler than others, you may have assets in a different state that has a more difficult probate process. With a straightforward simple probate case in Southern California, the probate process typically takes about approximately 9 months to a year, sometimes more, sometimes less. In some instances, a probate can remain open for years due to unforeseen circumstances. If you can avoid the probate court process, you will be happy that you did. The process is expensive, takes a long time to complete before assets are distributed to anyone and whoever wants information on what assets are in the estate and who will receive them and when has only to make a visit to the courthouse and pull the file.
Is A Living Trust Right For You?Living Trusts are the most popular estate-planning tool to allow families to avoid the expense and delays of probate, lower your taxes, protect the privacy of everyone involved and avoid the court system if you should wind up with a physical disability. For most estates over a total value of $150,000.00, it is the only way to avoid the high expense, delays, and public exposure of the probate court process.
Avoiding probate means not only avoiding hassle and expense, but also saving time. Probate can extend the amount of time before an heir receives an inheritance by months or even years. Not only can this create hardship among the heirs, but the property in the estate may also suffer. Many assets must be carefully managed to preserve and enhance their value. Losses may easily occur during this interim period.
There is an emotional price to pay, too. Survivors may be continually reminded of the loss of a loved one as the process drags on.
Probate can also lead to loss of privacy. Wills and probate are public matters, whereas a Living Trust keeps the estate private. Typical probate documents list all assets, appraised values and names of new owners. This information becomes available to marketers, media, creditors and con artists.
If the estate includes property in more than one state, the process becomes even more complex. A separate probate administration is required for out-of-state property. As you can imagine, "multiple probates" are even more time-consuming, expensive and emotionally taxing than a single probate administration.
In summary, the living trust's avoidance of probate and the protection of the successor trustee in the case of incapacity are strong reasons to consider a trust-based estate plan.