8 ways to leave a mess for your heirs. - The Finance Forums: Financial planning, debt help, loans, mortgages, retirement and 401k, investment, and general finance discussion forums

GarySpicuzza · #1 (**permalink**) 01-15-2008, 10:48 AM

Click THIS printer friendly link.

1. Staying ignorant about the process

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As with most things, but especially with estate planning, when you don't know what you're doing, mistakes practically make themselves.

Lawyers are supposed to look out for your interests, but they're not always successful. "They bury their mistakes," says Ron Christner, an associate professor of finance at Loyola University. "In other words, you have a will made out when you're 40 and you die when you're 80, and they look at your will and say, 'Oh, this is all wrong.' Well, that's 40 years too late to discover that. But that's when you find out that somebody made a mistake."

2. Being clueless about the role of wills

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"Where attorneys make money is in probating the will. They might do a simple will for you for $300, but if they probate the will when you die, they get approximately 2% of your assets, [3% in Florida] depending on state law," says Christner.

Many people think a will acts as a free pass around probate court -- a common misconception.

Instead of simply writing up a will, experts recommend putting assets into a living trust -- especially if you own real estate.

3. Putting your kid's name on the deed

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Adding your kid's name to the title of your house is not a good way to pass the old homestead on to the next generation. Tax implications make it a clunky way to bequeath assets.

"When you inherit property, you get an incredible step up in basis on it," Orman says. "So if you inherit a house and the value of it is worth $500,000 on the day you inherit it, and you then turn around and sell it for that, you don't pay any tax because that's your new cost basis.

"If you get that property as a gift while a parent is alive, you take over your parent's cost basis," Orman says. If the property has appreciated since your parent bought it, you're on the hook for the gains, which will be taxed when you sell it.

4. Dawdling indefinitely

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Procrastination may be forgivable for young singles with no dependents, but if you never get around to doing anything, the grief experienced by your survivors will be compounded.

Inaction all but guarantees that tensions will run high after you die.

5. Not trusting trusts

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Going through probate, a necessity if you die intestate (without a will), will result in your estate paying too many fees. Though often discussed, federal estate taxes won't even touch most estates, but court costs definitely will if not planned for. Why fritter away as much as 10% of your assets built throughout a lifetime of hard work?

"The whole purpose of having a trust is to avoid probate, because that allows your estate to pass to your loved ones without having to employ an attorney or go to the court," Berkley says. "It just goes directly to your heirs and minimizes many of the expenses to your estate."

6. Leaving messy financial records

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Pawing through someone else's disorganized records isn't anyone's idea of a good time. Add in grief and the stress of trying to unearth a will or some other evidence of planning, and it's downright chaos.

Keeping track of all of your information and organizing it in a recognizable way is vital, Christner says. "Social Security numbers, insurance policies, the name of the companies you do business with, your brokerage accounts and where they're held, and account numbers should all be included."

7. Giving your ex-spouse a [UNINTENDED] parting gift

Quote:

Failing to occasionally update an estate plan or make changes to beneficiaries after divorce, marriage or other life changes spells trouble.

Major changes such as having children or buying and selling property warrant changes in your will or trust. Equally important are making changes to beneficiary designations on retirement accounts and insurance policies, as those forms trump a will.

"An insurance policy that has a beneficiary on it -- is not dictated by a will or a trust," Orman says. "A retirement account that has a designated beneficiary or a payable-on-death account at a bank -- those accounts aren't dictated by a will or a trust."

8. Letting others figure out what you want

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"I had one situation that was so bad," he says. "The person died without leaving a will or any instructions, and she left three daughters. And there was such fighting between them over who would get what that it went to the court. The court decided that no one was going to get anything and appointed a public guardian to come in and take the entire inventory and sell everything and then write three checks to the daughters.

Besides easing the transition after death, leaving specific instructions about your medical care while alive -- specifically, in the form of a medical directive -- also comes in handy.

"We definitely recommend a health-care power of attorney if you are temporarily disabled, a financial power of attorney for someone to pay the electric bill and the gardener and the mortgage if you are disabled," Berkley says. "There's also a very important document known as a living will, which directs a physician. And that really came into prominence in the Terri Schiavo case. Had she had such a document, her family and her husband would not have been at odds fighting for what her wishes were."

This article was reported and written by Sheyna Steiner for Bankrate.com.
Published Jan. 8, 2008

GarySpicuzza · #2 (**permalink**) 02-02-2008, 02:50 PM

...a BIG payday for an unintended third party beneficairy of your Estate when you signed your Last Will & Testament.

The word apathetic means:
not interested or concerned; indifferent or unresponsive.
(much like this thread that was dead on arrival)

The word ignorance means:
lack of knowledge, learning, information.

In Florida apathetic ignorance will cost your family a minimum of 3% of the Inventory Value of your Estate... See Florida Statute 733.6171
...and just who is this unintended third party beneficairy of your Estate?

Well, it's the Probate lawyer who has to legally clean up the mess you left for your children and loved ones because of your Apathetic Ignorance.

GarySpicuzza · #3 (**permalink**) 02-13-2008, 12:58 PM

THIS is an interesting linky from the UK.

Quote:

What will happen to your assets after you die? Will those who you care about, and have worked so hard for, be properly supported? These are not the sort of questions most of us like to dwell on. Indeed, statistics point to the fact that over 70% of adults die without a will.

I know, I know, I know, you don't care what happens after you're dead which is the EXACT apathetic attitude the Probate attorneys are counting on.

No one would pay an attorney $12,000 to $15,000 or more to draft their Last Will & Testament but in effect that's exactly what you have done when you sign your Will or when you die intestate without any Estate Plans.

The perception problem is that YOU don't see the bill, your children are the one's who have to pay the $12,000 to $15,000 or more to some unknown and unnamed third party unintended beneficiary of your Estate known as the Probate attorney.

The "other" wrinkle in the perception problem is the fact this occurs upon the "second death" between married couples. When the second spouse dies is when all the Federal Estate Tax problems and Probate Court problems manifest themselves.

Mynion · #4 (**permalink**) 02-13-2008, 05:12 PM

In addition, Gary, the executor of the estate also gets paid, and lots of times it happens to be an attorney or other trusted professional, NOT the heirs.

I went through probate with my mother's estate, and it was that experience that motivated me to change careers from a Computer Engineer to Finance. You don't know how nasty probate is until you actually go through it. My mother was not rich, by any means, and her case took almost 3 years to settle. The attorney got paid during that entire 3 years, while I got nothing. Fees ate up almost all of what was left of the estate...

It concerns me when people are ignorant about the pain and suffering in regards to finances they typically leave their heirs to deal with.

Would you prefer your heirs to have "happy" memories of you? Or the last thing they remember could be how unprepared you were, or how little thought you put into making sure they get taken care of. And when they find out that just a little bit of planning would've resolved everything, what do you think they feel then?

GarySpicuzza · #5 (**permalink**) 02-19-2008, 01:31 PM

Mynion wrote:

Quote:

You don't know how nasty probate is until you actually go through it.

Exactly.

And the dirty little attorney secret is that Probate Court happens upon the death of the second spouse. Most all wills drafted by probate attorneys between married couples are ridiculous redundancy.

Which brings me to yet another

box rant!

Probate attorney fees in Florida are 3% of the Inventory Value of the Estate on the first $900,000 of assets INCLUDING the Homestead. Don’t get confused between the Florida Constitutional Homestead Exemption protecting the Homestead from creditors of the Estate with Probate Court attorney legal fees for the Personal Representative, plus Court costs. These are two (2) distinctively different things. The market value of your Homestead is included in the “Inventory Value” of your Estate for the purposes of determining attorney fees pursuant to Florida Statute, 733.6171

A typical $400,000 Estate would cost the heirs under their Mom or Dad’s Last Will & Testament a minimum of $12,000 in attorney fees. Let me define “typical.” This would be a Senior with a paid off home worth about $150,000 and cash on hand of about $250,000. This scenario is abundantly typical in Florida.

Married couples are particularly vulnerable when the second spouse dies due to what I call attorney ridiculous redundancy.

Probate practice attorneys love to draft Wills for married couples naming each other as their own Personal Representatives and then of course they name each spouse as the 100% beneficiary of each other’s Will. This is ridiculous redundancy because most all married couples own their assets as Joint Tenants with Right of Survivorship. Their Last Will & Testament does NOT control that type of property. The attorney assures the elderly couple that if anything happens not to worry because everything goes to the other without Probate Court leaving them an absolutely false impression that now all their affairs are in order.

Their "affairs" are in the exact same order after they signed their Wills as before. The ONLY thing the Will did for the elderly married couple was to name successor Personal Representatives and Beneficiaries when the second spouse dies.

Yes, it's true their property won't go through Probate when the first spouse dies but NOT because of their Wills, it’s because of their Joint Tenancy form of Ownership. What the attorneys fail to disclose to the elderly couple is the FACT that when the second spouse dies is when all the Probate Court problems start. The Joint Tenancy form of ownership is severed upon the death of the first spouse. Now Mom or Pops own all the assets as an Individual Sole Owner and that form of ownership always triggers Probate Court upon death.

Remember my comment about ridiculous redundancy? Both spouses are now dead. Neither ever served as the other’s Personal Representative and never was any of the Probate Estate passed to the surviving spouse by way of the Last Will & Testament. Their assets passed to the surviving spouse by “Operation of Law” on the first death because of the Joint Tenancy form of ownership. After they are both deceased, the adult children heirs who were listed as the secondary Personal Representatives and Beneficiaries now have to take an expensive and complicated trip through the Probate Court System.

Keep this phrase in mind, “when the second spouse dies.” When the SECOND SPOUSE DIES is when all of the Probate Court problems and Federal Estate Tax problems manifest themselves.

A Last Will & Testament between married couples who own all their assets as Joint Tenants has absolutely no control of those assets upon the death of the first spouse joint owner. One spouse will absolutely predecease the other and guess what happens when the SECOND SPOUSE DIES?

BINGO, with open arms the probate attorney will bite his bottom lip, offer his condolences for your loss and think to himself:

Welcome, to the Florida Probate Court System. Please allow me to advise you regarding Florida Statute, 733.6171, Compensation of the Attorney for the Personal Representative.

No clear thinking person would ever pay an attorney $12,000 to draft their Last Will & Testament. Nor would any clear thinking person pay an attorney $20, $35, $150 or even $300 dollars to draft their Last Will & Testament if they understood the attorney would be charging thousands of dollars in fees when the Will is Probated. $27,000 dollars to be exact for a $900,000 estate.

Now let me ask you a rhetorical question.

Did you know and consciously understand when you signed your Last Will & Testament you unwittingly named some unknown attorney as a future 3% beneficiary of the total value of your Estate upon death?

This concludes this

box rant!

GarySpicuzza · #6 (**permalink**) 03-05-2008, 12:48 PM

For those of you who would like to know the answer to my rhetorical question:

Quote:

Did you know and consciously understand when you signed your Last Will & Testament you unwittingly named some unknown attorney as a future 3% beneficiary of the total value of your Estate upon death?

One of the good guy attorneys here in Florida has a Probate Calculator on his website.

Click HERE.

Please note that not only does the attorney get 3% of your Estate, the Personal Representative also gets another 3%.

GarySpicuzza · #7 (**permalink**) 04-29-2008, 12:44 PM

Shamelessly ^-bumping-^ this topic to the top of the message board as this is THE one area of Financial/Retirement/Estate Planning most overlooked by the General Public that causes the most financial grief when someone dies.

Alan Baggett · #8 (**permalink**) 06-14-2008, 01:41 AM

I read this thread through and realize just how unprepared I am to die.

Maybe I'll have to put death off until I'm better organized.

GarySpicuzza · #9 (**permalink**) 06-15-2008, 11:32 AM

Quote:

Maybe I'll have to put death off until I'm better organized.

If you wait too long, say... after the fact, then your children and family get "The Probate Experience."

The person depicted in the below cartoon isn't YOU.
You've moved on..........

It's your beneficiaries under a Last Will & Testament.

But don't worry the chains will be taken off after 6 months to 3 years at a cost of 3% to 8% of the total value of your Probate Estate. That money is paid out to the Attorney for the Personal representative/Executor/trix plus Court costs.

Click HERE to review these fees, costs and expenses in The Sunshine State.

Quote:

733.6171 (3) Compensation for ordinary services of attorneys in formal estate administration is presumed to be reasonable if based on the compensable value of the estate, which is the inventory value of the probate estate assets and the income earned by the estate during the administration as provided in the following schedule:

(a) One thousand five hundred dollars for estates having a value of $40,000 or less.

(b) An additional $750 for estates having a value of more than $40,000 and not exceeding $70,000.

(c) An additional $750 for estates having a value of more than $70,000 and not exceeding $100,000.

(d) For estates having a value in excess of $100,000, at the rate of 3 percent on the next $900,000.

PLUS Court costs and Estate shrinkage caused by delay.

Alan Baggett · #10 (**permalink**) 06-15-2008, 03:20 PM

You're absolutely correct and I should get myself (and affairs) organized.

With Tim Russert passing away so suddenly and unexpectedly you realize that you just never know. So its best to prepare for the always eventual.