Save Thousands with Estate Planning

by GettingFreedom on September 8, 2011

First off let me just state the obvious–I am not a lawyer and I’m not handing out legal advice.  I am, however, letting you know what I’ve learned the hard way in hopes that your family can be saved additional heartache and possibly thousands of dollars.

 

Estate Planning, naming beneficiaries, and drawing up wills are generally the last thing we think about when it comes to financial planning.  If you’re like me, you’ve heard of probate court, TOD’s and POD’s, and you’ve heard lawyers and other professionals tought the importance of such things, but you never put much weight into it. 

Now, dealing with my mother’s estate, my entire outlook has changed.

Estate Planning is essential!  Hopefully I’m able to convince you of that by the end of this post.

Why You Need a Will

Having a will drawn up will ensure that whatever personal belongings and assets you do have will go to the person you’ve designated. Without a will, the probabte court will make these decisions based on your state’s laws. 

Drawing up a will doesn’t have to be expensive, and can oftentimes be handled with legal software such as Quicken Willmaker Plus–which is under $50 in most cases.

What is Probate?

In a nutshell, probate is the court process of the distribution of your assests.  Even if you have a will, your estate will still have to been seen in probabte court to determine it’s validity.  Probate court generally takes about a year {could be less, but also could be longer}, and is tedious and expensive.  

Probate Court doesn’t come without expenses, either.  Each estate and state, for that matter, are different–however, it isn’t uncommon to rack of thousands of dollars in fees.  For instance:: In Missouri probate attorney’s get a percentage of the estate value and is based upon a graduated scale as follows: 5% of the first $5,000; 4% of the next $20,000; 3% of the next $75,000; 2.75% of the next $300,000; 2.5% of the next $600,000; and 2% of everything over $1,000,000.  If we were to assume that that the average person has an estate valued at $200,000 {that includes home, vehicles, and bank/saving accounts, retirement accounts}–which is a conservative assumption, the attorney would receive $6050 right off the top!  Ouch!  Also, for every form you file with the court {each estate generally has atleast 2} you incur another $100-200 per form.  That’s money that could be in the hands of your spouse or heirs.

Name Your Beneficiaries

A very easy way to save your family thousands of dollars in lawyer and court fees, is to designate your beneficiaries and utilize direct transfer designations such as POD’s {Payable on Death} and TOD’s {Transfer on Death}.  In the event of your death, these properties–bank accounts, insurance policies, retirement accounts vehicles–all go straight to the named.  No courts, no lawyers, and no fees!  And–they are free and easy to set up, just ask your financial institution.

There are obviously other things to consider when planning your estate, and things are always as cut and dry as I’ve made them sound.  However, with a few simple and easy steps now, you can literally save your family thousands of dollars in a time when they have bigger things on their mind. 

For additional information on this topic you might find this articles of use::

Money 101: Estate Planning

Beware of Direct Transfer Designations

Frequently Asked Probabte Questions

This post is part of Frugal Friday.

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{ 1 comment… read it below or add one }

Hiptobeme September 19, 2011 at 3:07 pm

Thank you for sharing your hard won experience!

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