Nosey Neighbor Nellie Can Find Out About Your Probate. Really.

Most people think of probate as a private process. However, since wills are filed at the courthouse, probated estates become a matter of public record. That means your nosey neighbor Nellie can simply go down to the courthouse or hop online and find out about your probate. Really.  

It’s Not Just Nellie That Has Access…

After a death, most states require that whoever has possession of the deceased person’s will must file it with the probate court – even if there won’t be any probate court proceedings.  While Nellie may be an annoyance and have no other reason to view the information other than curiosity, others can get access to your public records and make your beneficiaries’ lives miserable, such as:

• Financial predators. While today’s digital world is convenient, it’s also dangerous.  Financial predators find ways to access information online. Since courts are part of a bureaucratic process that often moves slower than a glacier, months can elapse before you (or the court) realizes that your beneficiaries have been swindled.
• Charities. Even the most well-meaning charities can become an annoyance when money is considered “up for grabs.” This is especially true in an estate situation when those inheriting assets want to do the right thing and honor their loved one.  
• Will challengers. Public record documents such as probate provide those with an interest (whether valid or invalid) to challenge the will. This can equate to added costs and time defending the will.

Avoid the “Nosey Nellie” Factor with A Trust

Trusts are never filed with a court, either before or after your death. Probate courts are not involved in supervising your trust administration. So, you can avoid busy bodies and predators by creating a trust. While some state laws require a total, or partial, disclosure of the trust to beneficiaries, it is still the best way to keep your legal affairs private. Did you hear that, Nellie? Contact us today and let us help you create a trust to avoid probate and keep your family and financial affairs private

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Is a Will Obsolete?

Is a Will Obsolete? In my opinion, the Will is not completely obsolete, but it is close.

A Will requires Probate

That surprises many people. They think that by writing a Will, the are avoiding probate. This just isn’t true.

A Will requires a Court to validate it and admit it for administration. Only then is the Will active.

No Lifetime Protection

A Will doesn’t provide any lifetime protection for you or your assets. A Will is only active after it has been validated by a Judge.

It takes a Durable Power of Attorney and a Healthcare Power of Attorney to provide lifetime protection for you.

Medicaid Recovery

A Will alone exposes your home to “Medicaid Recovery.” Even though Medicaid lets you own a home, when you pass, they can put a lien against it. As part of probate, that lien must be paid even if it means selling the home.

Creditors

Creditors can put their claims in during Probate. They will have to be paid as part of the Probate process. Even if it means selling assets, the claims must be paid.

What to do Instead

You need to use more than just a Will.

For your lifetime protection you need a General Durable Power of Attorney and a Healthcare Power of Attorney. These name the person (or people) you want to manage your financial, personal, legal, and medical affairs if you can’t.

You need to work with an attorney well versed in estate planning. They have methods to pass your real estate and other property outside of Probate without a Trust. Arkansas has types of deeds to pass real estate outside of probate and avoid Medicaid Recovery.

Here are a few reasons to use a Trust based plan:

• You have minor children
• You have children with special needs
• You have children with addictions to drugs, alcohol, gambling, …
• You have children with rocky marriages
• You worry about children divorcing
• Your children have trouble managing money or have credit issues
• You want to leave complex instructions or sell everything and split the money

Conclusion

Is a Will Obsolete? Not completely, but it is at the beginning of its end. The only reason you really need a Will is as a safety net in case something isn’t handled otherwise.

No Probate = No Creditors

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Warning: Don’t Let Creditors Inherit from You

Shocking to most people, the retirement account you leave for your spouse can be seized in a divorce, lawsuit, or bankruptcy.

3 Options Available To Surviving Spouses

When your surviving spouse inherits your IRA, he or she generally has three options:

1. Cash out the inherited IRA and pay the associated income tax.

WARNING: the cashed-out IRA will not have creditor protection and accelerates taxation.

2. Maintain the IRA as an inherited IRA.

WARNING: the cashed-out IRA will not have creditor protection.

3. Roll over the inherited IRA and treat it as his or her own.

WARNING: the cashed-out IRA will not have creditor protection.

It’s frustrating to many that a stranger can swoop in and take their hard earned money; fortunately, there’s a solution and that solution is a retirement trust.

Standalone Retirement Trusts Provide Protection

A Standalone Retirement Trust (SRT) is a special type of revocable trust designed to be the beneficiary of your retirement accounts after you die. It can protect your assets from creditors. In fact, we can include trust provisions which specifically benefit your spouse in situations such as:

• Second marriages
• Divorce
• Lawsuits from car accidents, malpractice, or tenants
• Business failure
• Bankruptcy
• Medicaid qualification

Want To Know More?

The bottom line is that a properly drafted SRT is often your best option for protecting your retirement assets (and providing the bonus of tax deferred growth). Want to know more? Contact us today to schedule a conversation. We look forward to working with you.

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Estate Planning Process

The estate planning process, as we see it, is a system of 9 steps.

Why a system?

A system is a repeatable set of steps that maximizes the benefits of the results. Systems are built and monitored to minimize errors and maximize benefits.

The 9 Step Estate Planning Process

Step 1 – Take Action

It is better to get started than to let this sit as something to get done later. You can make changes and fine tune the plan later.

Commit to creating your estate plan just as soon as possible or your family will pay the high price financially and emotionally. If you don’t act, State law will decide who makes decisions if you can’t make them yourself. State law will decide who gets your estate, how much, when, and how.

Step 2 – Decide Goals

The second step of the estate planning process is to decide you your goals.

Different people have different estate planning goals. Some want to leave as much as possible to their children. It is up to you to decide what your goals are. You may have multiple goals and that is fine.

Step 3 – Pick Who Make Decisions

If, when, something happens and you can’t make your own decisions, you need to have people you know and trust to step in and make your decisions.

If you don’t, then your family or friends must go to court and see the Judge. The Judge will decide, not you, who will make your decisions and how much power they get.

Step 4 – Take Inventory

The fourth step of the estate planning process is to take an inventory.

This doesn’t have to be a complete, detailed inventory, but you need to know what you have and what you owe.

At a minimum, you should write down what you have where. Someday, somebody will be glad that they don’t have to call every bank in the area to find your accounts.

Step 5 – Decide Who Gets What

Decide who gets what, when, how, and how much.

Step 6 of the Estate Planning Process – Decide How You Want to Avoid Probate

This is the step where you probably want to enlist the aid of an attorney with estate planning experience.

A plan to avoid probate ranges from simple to complex, depending on your circumstances.

The plan that works for many people is a beneficiary plan. This plan uses mechanisms that transfer your property and money immediately without probate, skipping the courts, creditors, and Medicaid. It puts a special deed in place on your house that not only moves it to the new owners but keeps it out of the hands of Medicaid if you ever need Medicaid.

Step 7 – Get the Documents Done

            With the decisions made, it is time to go to a professional, knowledgeable, and responsive attorney to have the legal documents created. An experienced attorney will know exactly what questions to ask to make sure that you get the best plan possible for you and your family. You’ll get a plan that captures your wishes, protects you, takes care of your family, and minimizes or eliminates Judges and Court.

Step 8 of the Estate Planning Process – Fund the Plan

Step 8 of the estate planning process is to fund your plan.

No matter what type of plan you have, you’ll need to go to the bank, financial advisor, DMV, retirement advisor, and a few other places to setup the beneficiaries on your accounts or retitle the accounts like you want. This plan depends on having beneficiaries created and properly maintained.

Step 9 – Ongoing Maintenance

Your plan isn’t even complete. Things happen that will require changes to the plan.

A few of these events are:

• Birth or adoption of children
• Death of a spouse, children, or somebody on your powers of attorney
• Adding people to the plan or changing percentages
• You get married or divorced

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Estate Planning Explained

Estate planning explained often as the process of preparing to transfer your property to your loved ones and others when you pass.

This misses a whole lot of what estate planning is all about.

Estate planning also includes preparing for incapacity and dementia before an accident, medical incident, illness, or dementia strikes.  These things often strike without warning or creep up on us and leave us incapacitated.

When we can make our own decisions because of incapacity, nobody else can make them unless you have planned, or your family goes to court. It’s easier to plan now than to force your family into court.

Estate planning explained like I think it should be…

Estate planning is the process of preparing for incapacity and preparing for the distribution of your final estate.

First is preparing for incapacity. To do this, you need to create powers of attorney.

The first power of attorney you want is a Durable Power of Attorney. This names somebody to make legal, personal, and financial decisions when you can’t. Without it, your family is forced to court.

The second power of attorney you need is a Healthcare Power of Attorney. This power of attorney names the person or people you want to make healthcare decisions for you when you can’t.

You also need a HIPAA waiver.  HIPAA is a federal law that protects your healthcare information. Without a HIPAA waiver (protected healthcare information waiver) in place, even your family can’t get information from healthcare workers.

The final thing you want during your lifetime is a Living Will. This is not to be confused with a Last Will and Testament. A Living Will is an advance healthcare directive. This document tells doctors that you don’t want to be kept alive artificially if everything has been done.

Then there is preparing for passing your estate. This is done either with a beneficiary plan or a trust plan.

A beneficiary plan is based on using beneficiary designations to pass your estate outside of probate.

A trust based plan uses a trust to pass your estate outside of probate.

Either way, the goal is to pass as much of your estate outside of probate as possible.

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Estate Planning Costs

Estate planning costs can be looked at in two ways…

First, what is the cost of creating an estate plan?

Second, what is the cost of NOT creating an estate plan?

First, let’s examine the cost of NOT creating an estate plan.

The Estate Planning Costs of NOT Planning

If you don’t create your own plan, then the State has written an estate plan for you!!!

When you decide to NOT create your own estate plan, you are agreeing that the State’s default estate plan is okay with you.

The State’s Estate Planning Costs

Here are the estate planning costs associated with the State’s plan.

Guardianship

If you can’t manage your own affairs, pay bills, make decisions, and more then the State says your family must go to court. They must go to court to get permission to make your decisions. This is called a Guardianship.

The court rips away your rights to make decisions and gives it to a family member. It is not necessarily the family member you would have picked to stand in your shoes.

The financial cost of a guardianship is about $3,500 up front and about $300 per year for the annual reports.

Guardians are restricted in what they can do. Often, they end up back in court, at additional cost, to get permission to do things.

Probate

When you pass, then your family must Probate your estate. Only, without a plan, the State’s plan is used.

The State’s plan requires that your family goes through a very formal, very strict, very expensive probate.

You can expect this to take at least 1 year of time and cost at least $4,000.00!

This is only the financial cost. It doesn’t include family strife and the emotional costs of probate. Until probate is over, many people can’t grieve properly.

Total Financial Costs

Financially, your family is looking at $3,500 for you, $3,500 for your spouse and $4,000 for probate. This comes up to about $11,000. Or $7,000 for guardianships and $4,000 for probate.

Estate Planning Costs

As of October 2021, you can have a comprehensive estate plan created for about $2,150.00 for a couple.

This plan includes

• Durable Powers of Attorney to stop guardianships
• Healthcare Powers of Attorney to stop guardianships
• HIPAA Waiver to allow the people you want to talk to doctors, nurses, and other healthcare professionals
• Living Will to tell doctors you don’t want to be kept alive artificially if nothing else can be done
• Last Wills and Testaments to express your wishes
• Beneficiary Coaching to teach you how to pass property outside of probate
• Deed to pass your house outside of probate and protect it from Medicaid recovery

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Adopted Children Estate Planning

Adopted Children and Estate Planning is a topic that comes up from time to time. It is important to understand the way the law treats adopted children for the purposes of estate planning and inheritance.

Many times, people don’t realize their rights, or lack thereof, by being adopted. Parents are just as confused. Too many parents and children think that adoption doesn’t really change anything. Then children are frustrated when they find out they don’t inherit from the parents that gave them up for adoption. Adoption severs all legal ties between the adopted child and their biological parents.

A child has a legal right to inherit from their adoptive parents just as if they were born to them. Under the law, a child you adopted is treated as having been born into the family for inheritance purposes.

A child has NO legal right to inherit from the parents that gave them up for adoption. Adoption legally severs their tie to the parents that gave them up. Even if they have met up and known each other for years, the child has no right to inherit.

On a related note, your stepchildren have no legal right to inherit from you. If you don’t have an estate plan, then they get nothing. I must tell somebody this all too often.

However, the relationship can be changed back.

Adult Adopted Children and Estate Planning

This brings an interesting fact about adopted children and estate planning…

You can adopt an adult in Arkansas. And I’ve done it to re-establish the legal relationship.

Most often adopting an adult is done in a move to re-establish an existing relationship or confirm a long-standing relationship. As an adult, adoption is not difficult. However, it is strongly recommended to get an attorney to help you with all the steps and paperwork.

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