(Newswire.net — November 1, 2018) — Ironically, most people follow what the majority does by spending most of their time and energy attempting to amass as many assets and worldly goods as they can for themselves and their families. Obtaining a lovely home. A large retirement for the future. A lot of toys including such things as boats, trailer homes, second homes, cars, four-wheelers, and the list goes on. That’s find.
But the mystery is that often people devote so much time and attention to accumulating all of such items (assets and toys) during their working years and, when they reach or approach retirement, they then commonly neglect to protect and plan how to use, and maintain, but don’t learn how to pass on what is left to the people they care for the most — their loved ones. They do no planning of their estates.
Why do people often follow that course of accumulating but not protecting and planning?
Clyde Dee Sandgren has spent over 35 years trying to understand why people are so careless with their accumulated estates. They frequently end up not even having a simple will, let alone a family trust.
Mr. Sandgren has concluded that possibly one reason might be that people are generally uninformed in the area of estates, wills, trusts, probate, and so forth.
To begin with, let’s look at probate; Probate was originally introduced through the court system here in America to make sure that the assets of a deceased person went to the right relatives or friends.
Problem: because of the huge volume of probate cases that now flood our court system, probate has evolved into a time-consuming, frustrating, and an expensive experience. In many states, the probate process may take over a year to complete, and it can cost 5% of the gross value of the estate or more. Knowing this, most people want to avoid the entire probate experience.
Caution: There are risky methods of avoiding probate.
One way to avoid probate is giving property away before you die. If the title and ownership to your assets are not in your name when you die then there is no probate at all. Some people say, “Well, that’s easily taken care of. We’ll give everything away before we die.” That can be done. But there have been many, many cases where people have lived way beyond when they expected to die and they ended up needing the assets they had given away.
Personal experience: An elderly couple gave everything to their children, expecting their children would take care of them as their health declined. The children didn’t want to be burdened, placed their parents in a substandard care center and went their way spending Dad’s and Mom’s money, leaving it up to the state or federal government to see to the parents care. Thus, giving your property away while you are alive is normally not an acceptable way to avoid probate.
Another common practice in avoiding probate is to place everything in joint tenancy with full rights of survivorship. This means that when death comes, the survivor(s) has the full rights to the property, but those rights can often create unintended results or obligations as well.
Caution: Joint Tenancy might create problems.
Suppose you have several children and one of them lives in the same city you do. If you place your assets in joint tenancy with that child, upon your death that child automatically and legally owns the rights to your property – irrespective of a will or trust.
You think, “No child of mine would ever hold on to all of my assets, just because I placed him as a joint tenant on my assets.” But experience has proven that when Dad and Mom are both dead, it is common that some children grab everything they can for themselves, without any concern for other family members. Remember: legally the surviving joint tenant owns the property.
An additional problem with joint tenancy occurs when one spouse names the other spouse as joint tenant. Upon the death of the first spouse, the surviving spouse owns the property.
Joint tenancy passes outside all planning and it does avoid probate but only on the death of the first spouse. When the second spouse dies, there is probate.
When both spouses die in a common accident, for example, there will be at least one probate, and possibly two probates. And probate is not cheap and it can be time-consuming.
A company named Inheritance Funding, Inc. has stated, “unfortunately, the probate process is a very unpredictable procedure. Thus, the timeline for a particular estate to go through the probate process is difficult to ascertain.”
To show what probate might be in a few states:
In Massachusetts; probate takes a minimum of nine months. California; the probate process takes approximately six months. Illinois; there is a six month period to contest a will. Utah; it should take less than a year.
Thus, joint tenancy is not a good way to avoid probate.
Yes, setting up a family trust requires some work for you and your attorney, but it is the best way to plan your estate and it is well worth the effort and a little expense.
Mr. Sandgren will be summarizing the advantages of Family Trusts and how economical they are compared with other options. Watch for that in a future article.
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