How do I Avoid Probate? (Video)

Today I want to talk to you about how to avoid probate.

Hi.  I’m Gary DeWitt, the owner of DeWitt Law Firm.

We do estate planning.  We do it well.  We make it as fast, simple, affordable, and painless as possible.

If you have questions about estate planning or probate, you can setup a time to talk, for free, by going to plan with Gary dot com.  The meeting is free.

Avoiding probate is many people’s goal in creating a plan.  It’s usually a matter of listening, creating an inventory, and looking at all the possible tools at my disposal then using the best combination.  Only experience in planning can create the proper combination.

You want to keep as much of your estate out of probate for several reasons.

First, anything passing outside of probate is not subject to creditor claims in Arkansas.

Second, it is faster and simpler.

Third, probate is expensive and time consuming.  You can just assume a probate will cost 6% of the GROSS value of your estate.  Debts are not subtracted out when calculating the percentage.  So on a $200,000 estate the cost will be around $12,000 and a year of time.

Finally, probate is a paperwork filled hassle for family and loved ones.  People are generally filled with anxiety until it is done.  A basic probate with a Will has over 100 steps to be done.  And that is if everyone signs waivers.  Without waivers, the process takes longer and involves even more paperwork.

It’s a matter of picking the right methods to meet other goals.  A couple with a special needs child will have a different plan than a couple without children.  A stable couple with children will have a different plan than a couple who have children with unstable marriages.

Here are just a few of the ways you can avoid probate, and a few things not to do.

Beneficiary deeds.  This is a special deed that leaves property on the owner’s death to who you want it to go to without probate.  However it does have some drawbacks.

Trusts.  Perhaps one of the best ways to avoid probate is to have a trust created.  With a trust you get to put the rules on who gets what, when, how, and how much.

POD.  POD is payable on death and is used to transfer bank accounts without probate.

TOD.  TOD is transfer on death.  TOD is used to transfer things with a title without probate, like cars.  The rules are pretty strict on what qualifies.

Beneficiary designations.  Beneficiary designations are used on life insurance, annuities, and the like to transfer outside of probate.

A few things not to do include

1.Putting your children on the deed 2.Putting your children on your accounts

You don’t want to do either of these because you run the risk of losing your real estate and money to their creditors, IRS, or lawsuit judgments.  Not to mention the Medicaid implications.

If you have any questions on estate planning or probate or want to chat, you can setup a time to talk to us by going to plan with Gary dot com.

Planning gives peace of mind, confidence, security, and certainty in an uncertain world.

You can setup a time to talk, for free, by going to plan with Gary dot com.  The meeting is free.

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The Steps to Great Estate Planning

Creating a great estate plan is a process, not an event.  I have a 5-step system.  More on that in just a moment.

Hi.  I’m Gary DeWitt, the owner of DeWitt Law Firm.

We do estate planning.  We do it well.  We make it as fast, simple, affordable, and painless as possible.

If you have questions about estate planning or probate, you can setup a time to talk by going to plan with Gary dot com.

Before law school, I had a computer programming career.  In that career you learn that mistakes and errors are easier to correct early in the process that late in a project. Changes and corrections are cheaper, easier, and faster to correct in the beginning that at the end.

The proper system catches mistakes early and gets them corrected now, not later.

The proper system simplifies the work you have to do.  I do the hard part.

Step 1 is to have an initial meeting in person, over the phone, or via zoom.  At this meeting I will actively listen to you and get your goals and needs out on the table.

Step 2 is for you to fill in the information I need to create a plan summary in the comfort of your own home.  You’ll then return that to me.

In step 3, I create a summary of the people and their roles.  This summary is sent to you.  You have the chance at this point to make sure names are spelled right and the correct people are in the roles you wanted.

Step 4, I create a summary of the plan and present it to you.  This summary is a basic outline of the plan.  Again, you have the chance to review and make sure it is what you wanted before the next step.

Step 5, I create the final documents and we have a signing and advising meeting.  At this meeting I answer questions, we sign the documents, and give you any last minute advice or coaching needed.

If you have any questions on estate planning or probate or want to chat, you can setup a time to talk to us by going to plan with Gary dot com.

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The Parts of a Great Estate Plan

What are the 4 parts to a great estate plan?

Hi.  I’m Gary DeWitt, the owner of DeWitt Law Firm.

We do estate planning.  We do it well.  We make it as fast, simple, affordable, and painless as possible.

If you have questions about estate planning or probate, you can setup a time to talk by going to plan with Gary dot com.

Great estate planning is more than just creating a stack of documents.

Great estate planning is a process that I divide into 4 parts.

Part 1 is actively listening.  Active listening is more than just taking notes and nodding your head. It means listening to what you are saying and asking probing questions to uncover your goals and needs.  It includes asking clarifying questions.

Part 2 is advice.  Sound advice on financial matters and legal matters can make the difference between an okay plan and a great plan.

Part 3 is coaching.  You need coaching and advice on the best way to handle your assets and affairs.  Coaching means working with you to arrange assets and affairs.

Part 4 is the documents.  The documents, while important, wouldn’t be as good without the first 3 parts. The right peer-reviewed documents can make the difference between a rock-solid plan, an okay plan, and a plan that fails.

If you have any questions on estate planning or probate or want to chat, you can setup a time to talk to us by going to plan with Gary dot com.

Planning prevents problems.

Planning promotes peace of mind.

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Thirteen Estate Planning Terms You Need to Know

Estate planning—it is an incredibly important tool, not just for the uber wealthy or those thinking about retirement. On the contrary, estate planning is something every adult should do. Estate planning can help you accomplish any number of goals, including appointing guardians for minor children, choosing healthcare agents to make decisions for you should you become ill, minimizing taxes so you can pass more wealth onto your family members, and stating how and to whom you would like to pass your estate on to when you pass away.

While it should be at the top of everyone’s to-do list, it can be an overwhelming topic to dive into. To help you get situated, below are some important terms you should know as you think about your own estate plan.

Assets

Generally, anything a person owns, including a home and other real estate, bank accounts, life insurance, investments, furniture, jewelry, art, clothing, and collectibles.

Beneficiary

A person or entity (such as a charity) that receives a beneficial interest in something, such as an estate, trust, account, or insurance policy.

Distribution

A payment in cash or asset(s) to the beneficiary, individual, or entity who is entitled to receive it.

Estate

All assets and debts left by an individual at death.

Fiduciary

A person with a legal obligation (duty) to act primarily for another person’s benefit, e.g., a trustee or agent under a power of attorney. “Fiduciary” implies great confidence and trust, and a high degree of good faith.

Funding

The process of transferring (re-titling) assets to a living trust. A living trust will only avoid probate at the trustmaker’s death if it is fully funded, meaning it contains all of the decedent’s assets.

Incapacitated/Incompetent

Unable to manage one’s own affairs, either temporarily or permanently; often involves a lack of mental capacity.

Inheritance

The assets received from someone who has died.

Living probate

The court-supervised process of managing the assets of an incapacitated person.  Conservatorship is another term used for this process.

Marital deduction

A deduction on the federal estate tax return, it lets the first spouse to die leave an unlimited amount of assets to the surviving spouse free of estate taxes. However, if no other tax planning is used and the surviving spouse’s estate is more than the amount of the federal estate tax exemption in effect at the time of the surviving spouse’s death, estate taxes will be due at that time.

Settle an estate

The process of winding down the final affairs (valuation of assets, payment of debts and taxes, distribution of assets to beneficiaries) after someone dies.

Trust

A fiduciary relationship in which one party, known as the trustmaker or settlor, gives another party, known as the trustee, the right to hold property or assets for the benefit of another party, the beneficiary. The trust should be memorialized by a written trust agreement, outlining how the trust assets will be distributed to the beneficiary.

Will

A written document with instructions for disposing of assets after death. A will can only be enforced through a probate court. A will can also contain the nomination of guardian for minor children.

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How to Own Your Real Estate

Real estate encompasses not only one’s primary residence but also other real estate such as a vacation home or a rental property. The ideal form of ownership varies depending on the type of real estate you own. Below, we take a look at the different types of real estate and offer advice about the best form of ownership for each.

Primary Residence

Because your primary residence receives special tax treatment, you should carefully consider how your home is owned. In some states, tenancy by the entirety offers married couples creditor protection from the creditors of one of the spouses (with a possible exception for federal tax liens) while still preserving relevant tax benefits. It also allows automatic transfer of ownership to the surviving spouse upon the death of the first spouse without court involvement. Transferring ownership of the primary residence to a joint revocable trust may also be an option if you live in a state that allows the tenancy of the entirety protection to transfer to the joint revocable trust. Ownership by the trust also means that the real estate will not go through the lengthy, expensive, and public probate process but will instead be handled according to your wishes as specified in the trust document.

If you are single, owning the property in your name allows you to take advantage of tax benefits for primary residences. Transferring ownership to a revocable living trust may also allow you to retain the applicable tax benefits with the added benefit of avoiding the probate process. If asset protection is a major concern during your lifetime, certain types of irrevocable trusts are best suited for your needs but may require you to give up some control of the property.

The bankruptcy code may provide additional protections for a primary residence (e.g., your state may have a homestead exemption). However, in some states, transferring your primary residence to a trust may eliminate the homestead exemption because the trust rather than you (the debtor) will be deemed to be the owner of the residence. If this situation could apply to you, it is important that you meet with a knowledgeable estate planning attorney before transferring your primary residence to a trust.

Vacation Home

For some families, their vacation home has not only high monetary value but also significant emotional value. Ownership of a vacation home by a trust or limited liability company (LLC) can be advantageous because it addresses two main priorities: ease of transfer to the next generation and asset protection.

With a trust or LLC, you are able to establish rules for how the property is to be used and maintained, as well as designate what is to happen to the vacation home once you pass away. This can be a great solution if you want to ensure that the vacation home stays in the family for generations with minimal family conflicts.

An additional benefit of having an LLC own your vacation home is that it provides limited liability from outside claims. If a judgment is entered against the LLC, the creditor is limited to the accounts or property owned by the LLC to satisfy the creditor’s claims and cannot look to your personal accounts or property or those of the other members. Also, if a judgment is entered against you or another member for a claim unrelated to the LLC, it will be harder for a creditor to force a sale of the vacation home. This can be incredibly helpful if you wish to pass the vacation home on to the next generation without worrying about the individual financial situation of each new member.

Note: In some states, a single-member LLC (an LLC in which you are the only member) does not enjoy the same protection from your personal creditors. The rationale of these laws is that your creditors should be able to seek relief through your LLC interests to satisfy their claims because there are no other members that will be negatively impacted by seizure of money and property owned by the LLC.

If the vacation home has been in the family for many years, it is important to consult with us and your tax advisor to make sure that transferring your vacation home to a trust or LLC will not cause an increase in your property taxes or other unintended consequences.

Rental Property

Because rental property is an income stream rather than a residence, asset protection is usually the primary concern. As a landlord and owner of rental property, you face a higher probability of lawsuits arising in connection with the property because the occupants can change over time. Transferring ownership of the rental property to an LLC is a great option. If a renter gets injured on the property, sues the LLC that owns the property, and obtains a judgment that exceeds any property insurance you have, the renter can seek satisfaction of any claims only from the accounts and property owned by the LLC, not from your personal accounts and property or those of any other owners of the LLC.

In addition, ownership by the LLC may protect the rental property from your personal creditors. However, if you are forming a single-member LLC, it is important to have us check state law to make sure creditor protection is available.

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One Mistake Can Cost You Half

This one common mistake could cost you half your house and/or half your money. This one common mistake could cost your children a hefty tax bill.

I see people almost every day that have made it and don’t realize the consequences.

Here are some of the consequences you may not have foreseen.

What is the mistake? Putting your children on the accounts as co-owners of your accounts or on your deed.

• If your child gets divorced, do you want their spouse to get half your home and accounts?
• If your child gets in an at fault accident, do you want the other person to get half your home and account?
• If your child gets in IRS trouble, do you want the IRS to put a lien against your house?
• If your child gets in credit problems, even if it isn’t their fault, do you want to have to fight their creditors to keep your money?
• If you want to sell the house, do you want to give half the money to your child?
• If you put your child on the deed to your house
  • They will owe capital gains tax on their half based on what you paid for the house
  • You’ve just pushed probate off onto the next generation

There are alternatives that can protect your money and home while allowing your children to manage your money if you aren’t able to anymore.

Setup a Call to Learn the Alternatives

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How do I Choose Between a Will and a Trust?

Introduction

This is the process I go through when helping people answer the question “How do I choose between a will and a Trust?”. There are other more personal factors that go into the decision than this, but here are the more tangible things to consider.

Background

With a Will, all property not otherwise handled will go through Probate. Many people’s goal for planning is to keep their family out of Probate court. Probate in Arkansas takes a minimum of 8 months and can cost 3-6% of the gross estate (not taking out debts). Probate is a public process.

With a Trust, everything in the Trust stays out of probate. With us, we put your house and all your personal property in the Trust. It is up to you (unless you ask us to) to go to the banks, life insurance companies, and investment companies and re-title your property to the trust. Property in the Trust transfers in about 90 days, privately.

A good planner will always write a Will to go with a Trust. All the Will says is to put everything in the Trust and close Probate.

How do I Choose Between a Will and a Trust?

If you have one child, cars, one home, retirement accounts, and bank accounts you can get away with a Will and additional planning with the caveat that Probate may be required for property not properly titled to avoid probate.

If you want the best chance of avoiding probate and keeping your affairs private, then a Trust is the way to go. Probates are public. I just read a petition in a probate for over $250,000. Now the world knows how much the family will inherit.

Here is a list of things to consider when deciding how do I choose between a Will and a Trust?

1. Blended family and you want his property to go to his children and her property to go to her children.
2. Children with special needs that will need, or are currently on, means tested government benefits.
3. Multiple pieces of real estate
4. Ownership of real estate in more than one state (avoids multiple probates)
5. Children that spend money as fast as they get it or like to spend more than they have. A Trust can be set up to dole the money out over time instead of in a lump sum. A Trust can also protect the money against their creditors and any lawsuits.
6. Children with addictions to drugs, alcohol, gambling, and more can be protected and provided for without disinheriting them.
7. You want to main control of the money and set the rules for distribution beyond just who gets what. With a Trust, you decide not only who gets what, but when and how.
8. Children or grandchildren under 18 that will be inheriting. If a Trust is not created, often the court will impose one during Probate and then give them a lump sum check when they turn 18.
9. Children with credit issues can have their inheritance protected from creditors with a Trust.
10. Business interests are often best assigned to a Trust so that they pass without publicity.
11. You want to name ahead of time who will manage assets for you if you can’t and how they are to be managed.

What Else do I Need in Addition to a Will or Trust?

• A Durable Power of Attorney. You choose who will manage your financial, personal, and legal affairs if you can’t (or don’t want to anymore). This is arguably the most important document in a plan.
• A Healthcare Power of Attorney. You pick who will make healthcare decisions if you can’t.
• A HIPAA Waiver (Protected Healthcare Information Release). You name the people that healthcare workers can share information with.
• A Living Will. This tells the doctors, if the end is very near, if you want to be kept alive on machines or not.

That is how I work through the issues and answer the question “How do I choose between a Will and a Trust?”

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