‘We have no children’: My attorney says avoid probate. Should I put my $850K estate in a trust, and split it between family and charity?

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Dear Quentin,

My husband and I are in our early 40s, and we recently met with an attorney to get started on estate planning. We now have $850,000 in assets that we would like to pass on to our nieces, nephews and charitable organizations upon our death. We don’t have any children. When we recently met with an estate-planning attorney, he gave us several options.

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The alternative he recommended is to set up a trust, which would allow us to avoid probate court. Is Probate Court Really That Bad? After all we will die! I ask because the cost difference of setting up a trust to make a will is $3,000 versus $500. We’re wondering if building a trust is really a necessary expense?

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Confused about probate

dear confused,

There are no rules for saying how much you should leave for charity and how much you should leave for extended family. By all means set up a trust and a will for any assets that are not part of the trust. If you died intestate — without a valid will — your estate will go through the probate process according to state law. The probate court will take an audit of all the assets in the estate: real estate, life insurance policies, bank accounts, furniture and jewelry. These properties will then be distributed to the beneficiaries.

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If you are unsure, get a second opinion. Every person’s property is different, and every state is different. There is no one-size-fits-all. Your attorney is right about one thing: Probate is the equivalent of sticking a sign in your front yard with all the details of your property for your neighbors to see. Setting up a trust can be more expensive, but it can be worthwhile considering the amount of money involved. You also need to think about a trustee: a relative, friend, or even a bank. In addition, you can also keep the names of beneficiaries in your various bank accounts so that they too avoid probate.

Some people add beneficiaries to their home deed while they are alive to avoid the probate process. This is often a big mistake. Firstly, the transfer-on-death deed and/or leaving the property to a relative or relatives in his will means that he will get the full benefit of “step-up” basis on capital gains tax. That is, the profit on any sale will be calculated as the recent appraised/market value of the home less the sale price – not the original purchase price. Secondly, a transfer-on-death deed will also be cheaper than setting up a trust.

,Probate costs include far more than $500 of setting up a will. ,

Probate costs include far more than $500 of setting up a will. Let’s say your estate is worth $1 million when you die. “The fee for conducting a property check is determined by statute,” says Kern Singh, founder of Singh Law Firm in Fremont, Calif. “If your gross assets are worth $1 million, then attorney’s fees and executor fees equal $46,000. In addition, several thousand dollars will be in the form of court fees. We can traditionally call this $50,000 that your assets will be yours. before distributing your $1 million gross assets to beneficiaries.”

Singh agrees with your lawyer to avoid probate if possible. “Setting up and administering a living trust is one of the most guaranteed financially savvy choices you can make,” he says. “Regardless of what your assets are worth, once you can’t afford a tenth of the cost to set up a trust and administer a trust, it’s the expense for your estate to go through probate. Probably very little based on your facts. Deciding not to create a living trust based on cost is a really money-wise, pound-foolish choice.”

Charitable sentiment is weakening in 2022, Some studies have found, and this is not entirely unusual in times of economic uncertainty and a bearish stock market. Congratulations on thinking of your favorite causes. There is great satisfaction in leaving a part of one’s wealth for causes that support those who have not had equal opportunities in life, or help animals that have been unnecessarily victimized at the hands of humans. . We all have a life to live, and the ability to make that life easier for others is a gift.

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