Don’t make that tragic money mistake
I have a friend who has been obsessed with her parents’ wealth for as long as I can remember. She has always known roughly how much they have in savings and investments, how much their property is worth, and how much their monthly living expenses cost.
I don’t reveal any secrets outside of school. I’ve spent years telling him how strange I find his interest in money that isn’t his. While her parents deal with life, she worries about whether their money and possessions will be divided equally among three siblings when they are gone.
Fortunately, her parents are planners, so I don’t have to worry about her collapsing completely the day their wills are read.
His concerns, however, serve as a reminder that dying without a plan in place for those you leave behind can be a tragic mistake, financially and emotionally.
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Last will and testament
Dying without a will may not have an impact on you, but it can leave a powerful and painful impression on those you care about. When there is no will, your estate is probated. Rather than following your wishes, the estate court uses the laws of the state in which you live to determine who inherits what.
When a person dies without a legal will, it is called “intestate” and the probate court takes over. Depending on the complexity of your estate, the estate court can take anywhere from a few months to a few years to settle. Meanwhile, the court decides where everything you own will go. It can range from investment accounts to baseball card collections.
The probate court expects to be paid for its services, so it charges its legal fees “up front”. These fees generally vary from 5 to 10% of the total value of the estate. What remains is usually attributed to the next of kin. If you have an unmarried partner, friends, or charities that are important to you, they are unlikely to see any part of your estate.
While a will serves as a template for how you want your assets to be distributed, it may or may not save your estate from probate court. For example, your will may be subject to legal probate if someone disputes it or if you are part of a complicated business arrangement (such as co-ownership of a business).
Ways to Avoid Homologation
If you want to make sure that your estate does not end up in probate, these legal options are among the ones that can help you.
Revocable living trust
In a nutshell, a revocable living trust allows you to control all of your assets during your lifetime, but seamlessly transfer them to your intended beneficiaries upon your death, all without the intervention of the estate court.
Transfer on Death Designations (TOD)
Cars, trailers, motorcycles, RVs, boats, and other personal property can usually go directly to a beneficiary when a TOD is in place.
Designations payable on death (POD)
A POD designation allows you to transfer money from accounts to one or more beneficiaries. These accounts frequently include:
Suppose you own real estate and want it to transfer immediately to your beneficiaries upon your death. In this case, a deed of beneficiary allows real estate transfers to take place on your death, without approval.
If you want to be the one to decide who inherits family cookbooks, fishing gear, and all the other possessions that make up your daily life, write a will. You can purchase a simple will template from an office supply store for $ 5 to $ 20 or create a will online for under $ 100. Depending on the complexity of your estate, the average price to have a will drafted by a lawyer is $ 940 to $ 1,500, according to ThumbTack.
You can even set up a revocable trust without a lawyer using software or an online service. The Living Trust software will only cost you around $ 70, according to the online legal site NOLO.
Whether you want to do it yourself or prefer a lawyer to walk you through the process is up to you and what you can realistically afford. Because my husband and I wanted our estate planning to be tight and weren’t confident enough to try it out for ourselves, we recently worked with a lawyer to set up a revocable family trust. The lawyer also wrote new wills, updated our power of attorney forms, created living wills, and offered a ton of great advice, all for $ 1,600.
Here’s how we justified that cost: let’s say we die and we leave an asset of $ 800,000. If our estate goes through probate, the least our beneficiaries can expect the court to take is between $ 40,000 and $ 80,000 in costs (5% to 10% of the total value). That awareness was enough to make the $ 1,600 we spent to get it all a good deal.
Make it legal
If you are going to create your own will, make sure it is legal in your state. At the time of this writing, you must have the document signed by two witnesses – except in Vermont, where you need three witness signatures. Witnesses must be at least 18 years of age, of sound mind and not an heir or person mentioned in the will. In other words, your spouse and children cannot testify if they are beneficiaries.
Generally, a will does not need to be notarized, although it may be necessary to file it. Where you need to file your will depends on where you live. Some states require you to complete your file with a specific county court or registrar, while others have a wills register where wills are kept securely.
An appeal to your local court system or state bar may be enough to find out whether you need to file your will and, if so, where it needs to be filed.
The last word
In Sweden there is a term called “döstädning”. Roughly translated, it means “cleansing from death”. It is a time in life when people over 50 begin to purge their homes and organize their belongings so that their children are not burdened with all the “stuff” they leave behind when they die.
Organizing end-of-life documents like trusts, wills, powers of attorney, and funeral plans is another way to make sure the people we love aren’t overwhelmed by the things we leave behind when we die. This is our last chance to show them we care by making their lives a little easier.
Thinking about death is never fun, but knowing that you did all you can to prepare for it can give you some comfort.