A major part of estate planning is ensuring that you have the right information so that you can make informed decisions about settling your estate. Unfortunately, there are many myths and misconceptions that are often brought into discussions about estate planning. As a result, poor decisions are sometimes made about an estate. To help ensure you have the right information, here are some of the most common myths about probate and the truth.
Probate Is Expensive
One of the most believed myths about the probate process is that it is expensive. This is not entirely true. Probate does require that fees, such as the court filing fees and attorney's fees, are paid. However, it should be noted that some states have limits in place that set how much an attorney can charge for fees.
For instance, in California, attorney's fees are limited to four percent for the first $100,000 appraised value of an estate. Even with the other fees associated with probate, it is estimated that probate can cost between four and seven percent of the estate's value in the state.
In comparison to some of the fees associated with attempting to avoid probate, your estate could possibly save money by simply going through the process. An attorney can help you compare the costs of each and determine which is more cost effective.
A Trust Can Avoid Probate and Save Money
A living trust can help you avoid probate. However, whether or not it can save money depends is possibly not true.
The living trust is designed to distribute assets to your heirs over a period of time. Depending on how your trust is set up, this could last for years. It is the length of time those distributions last that determines whether or not money is saved.
Each year that the trust is responsible for distributing assets, a tax return has to be filed. Not only does this mean accounting fees, but it can also mean a fee to the trustee for administering the trust. Depending on the amount of the fees, it is possible that you could end up paying out more in trustee and accounting fees than if you had simply allowed the estate to go through probate.
The best way to assess the probate process for your estate is to work with an experienced probate attorney (like those at O'Connor Mikita & Davidson LLC). He or she can help clear up any misconceptions about probate and help you determine what is the most effective method of dealing with the process.Share