Estate Planning – Why It’s Important for You

Recently we’ve heard a number of stories about estate planning blunders that have resulted in huge tax costs and undesired distribution of assets. While a $50 million mistake certainly makes for good headlines, the fact is that quality estate planning is not just for the rich and famous.

It is common for people of all kinds to find themselves in similar situations when loved ones die, albeit with less fortunes involved – all because the deceased did not plan appropriately for death or disability.

Estate planning is all about your control over what happens to the assets you have accumulated during your life (including planning to minimize estate tax) and your control over your health care decisions.

Benefits of Estate Planning

1.    Avoiding probate of your assets. Probate is a court process by which the heirs of an estate are determined and the deceased person’s assets are distributed to those heirs. The benefits of avoiding probate include:

• Your assets can be distributed to or held for your beneficiaries in a timelier manner.
• Your estate avoids costly statutory attorneys’ fees.
• Assets can be held for minor children without court involvement.
• Your estate is distributed to your intended beneficiaries versus under Missouri law.

2.    Maximizing estate tax savings.

• A legal professional can assist you in analyzing the potential death taxes your estate may pay and how to pay the least amount.

3.    Planning during life.

• In the event you can no longer make financial and healthcare decisions for yourself, an effective estate plan can avoid court intervention by your family and seamlessly allow those you designate who you want to step in and make decisions on your behalf.
• Express your decisions regarding important healthcare decisions to give your family peace of mind knowing they are carrying out your wishes.

Other Questions

1.    Why isn’t a form that I can just fill out sufficient?

You don’t know what you don’t know. Estate planning is how the assets you worked your entire life to save get transferred to your beneficiaries. Often a form is not sufficient to consider issues that you may not know are relevant. For example, do you want assets going outright to your children? Do your children have creditor issues? Do you have children from a previous relationship? Are you concerned about expending all your assets on nursing home care?

These are issues that can be explored prior to drafting documents. What is an appropriate plan for your neighbor may not be appropriate for you. Form documents cannot take into account individual circumstances like a beneficiary who receives support from the government.

You have worked hard to accumulate assets to transfer to your designated beneficiaries. Without the experience of an attorney who is familiar with estate planning, you may miss important issues that could result in your assets not properly transferring as your intended.

2.    What are the fees if an estate has to go through probate?

• Most probate attorneys charge the GREATER of the statutory fee or the hourly time spent on the matter.
• Both the personal representative and the attorney may take the statutory fee or an hourly fee if such fee exceeds the statutory fee. In most local counties, the statutory fee cannot be taken by both the estate attorney and the personal representative if the personal representative is also an attorney.
  • Example Statutory Fees 1: Frank dies owning a home worth $100,000 and a CD worth $100,000. Both assets were solely in his name. Frank is survived by his wife Sallie and his two children from a prior marriage. While the estate is being administered, the home is sold for $95,000 and the CD is liquidated. Interest earned over the course of the estate is $500. To calculate the statutory fee, the following amounts are added together:
    • The proceeds from the sale of the real property – $95,000
    • The CD of $100,000
    • Interest earned $500
    • The amount upon which the statutory fee is calculated $195,500. The statutory fee on this amount would be $5,926.25 each for a total of $11852.50 being paid to the personal representative and the attorney. After Sally waiving her spousal allowances, the total amounts distributed are as follows:
      • Sally – $91,823.75
      • Child 1 – $45,911.87
      • Child 2 – $45,911.86
  • Statutory Fees Example 2: Same facts as above, but Frank also had a life insurance policy which paid out $500,000 to his estate.
    • The amount upon which the statutory fee is calculated is $695,500. The statutory fee in this case would be $18,937.50 for a total of $37,875.00 being paid to the attorney for the estate and the personal representative. After Sally waiving her spousal allowances, the total amounts distributed are as follows:
      • Sally – $328,812.50
      • Child 1 – $164,406.25
      • Child 2 – $164,406.25
• There are also additional costs involved such as the payment of filing fees, inventory fees, and the cost of a bond for the personal representative. These costs alone often exceed the cost of an appropriate estate plan.

No one likes to think about long-term illness or death. But the best way to take care of yourself and your family is to be prepared. Estate planning protects your assets, and allows you to make decisions regarding your health care and distribution of assets.