Misconception #1: A will avoids probate. No. A will is the primary tool of the probate system. Your will is like a letter to the Probate Court telling it how you want your property distributed. The Probate Court system must then make sure all your property is collected and appraised, and all your bills and taxes are paid, before they can distribute your property to your heirs. Misconception #2: Probate costs are small. No. Most executors (personal representatives) hire an attorney to help with probate. The attorney’s retainer, plus monthly bills — combined with the cost to inventory and appraise the estate, contact heirs, publish notice to creditors, and settle claims by creditors, friends and relatives — usually consumes 3% to 5% of the estate. For a $100,000 estate — modest by today’s standards — probate costs are commonly $3,000 or more. For a $300,000 estate, probate costs often top $9,000. The probate costs for a $600,000 estate can top $18,000. Misconception #3: Property can be distributed according to the terms of your will in only a few weeks. Not without risk. Even for a simple estate, probate usually takes at least 8 to 12 months. During this time, the deceased person’s property must be inventoried and appraised. Heirs must be notified. Estate and inheritance taxes must be paid. Contested claims must be settled. Creditors must be notified and paid. One reason probate takes so long is because is that creditors are given four months to file claims against the estate — even if there are no creditors. The personal representative may distribute property before probate ends. But if the estate does not have enough assets to pay remaining claims, then the personal representative will be responsible for those claims. As a result, most personal representatives won’t distribute property until they are sure all claims have been settled. Misconception #4: Your will and your assets remain private. No. Probate is a matter of public record. This means anyone — including nosy neighbors and salespeople — can go to probate court and ask to see your file. Anyone can know the balance in your savings account, the value of your stocks, even the appraised value of your diamonds. Because this information is public record, no one can be refused. All they need to do is ask. Misconception #5: A will helps you avoid taxes. No. A simple will does nothing to lower your taxes. A will simply tells how you want your property distributed, and who you want to act as guardian for your minor children in case you and your spouse die in a common accident. A skilled lawyer can use a will to plan complicated estates, but the cost of the complex plan will be comparable to the cost of a living trust plan. Plus, the will-based plan will still have to go through probate. Misconception #6: Your permanent home and your vacation home can be handled through the same probate. Yes, but only if they are in the same state. If you own property in different states, you will need to open a second probate, called an ancillary probate, which means you’ll need to hire another attorney. This will increase the probate expense. And if you own real estate in a third state, you’ll need to open a third probate. Misconception #7: A will prevents quarrels over assets. Wrong. Wills are the most contested legal documents in the United States. Today, it is common for unhappy friends and relatives to challenge a will. This results in higher attorneys’ fees and even more delays. Wills actually encourage challenges over assets because once the probate is open, the contesting party simply makes his case known to the judge without so much as even filing a lawsuit. Misconception #8: A will from one state is not legal in another state. Wrong. If the will is legal in the state where it was prepared, it is legal in all 50 states. Still, wills do not travel well from state to state. This is because the will’s language may not mean the same in the second state as it did in the first. Misconception #9: A will helps you when you become physically or mentally incapacitated. No. A will does nothing to help you through incapacity. Your family or friends may have to go to court to start costly guardianship or conservatorship proceedings. Misconception #10: A testamentary trust avoids probate. No. A testamentary trust is a trust contained within a will that holds property for a specific purpose. For example, one purpose would be to hold property until minor children turn 18, when they are legally permitted to inherit property. A testamentary trust is not a living trust. It is part of a will and takes effect only during the probate process. Misconception #11: You must name your attorney as your personal representative. No. You may name anyone you choose. When you name your attorney as your personal representative, you give him your permission to get paid twice: once when he acts as your personal representative, and again when he acts as the attorney to probate your estate. Misconception #12: The cost of your estate plan is only the cost of drawing up the documents. No. The cost of your estate plan is both the cost of drafting the documents and the cost of distributing property to your heirs. Simple wills are cheap to set up, but expensive when they go through probate. Living trusts cost more than a simple will, but the cost of settling your estate is substantially less. Misconception #13: Living trusts are only for large estates. No. Living trusts are for anyone who wants to avoid the costly and months-long probate process. People with estates as small as $66,000 can benefit from a living trust. People with larger estates benefit even more. Misconception #14: A living trust is a public document. No. Your living trust can remain private because it does not have to be recorded or published in any way. The only people who will know about your trust are the people you choose to tell. Misconception #15: A living trust cannot be changed. Wrong. You can change and even revoke your living trust any time you wish. The decision is entirely up to you. Misconception #16: A living trust must have a separate tax return. No. A revocable living trust does not need a tax return of its own. Your personal tax return is sufficient for the IRS. Misconception #17: When you set up a living trust, you lose control of your assets. No. When you set up your living trust, you simply name yourself and/or your spouse as trust managers, called “trustees.” In this way, you never give up control. I invite you call for a free appointment to learn how you can protect your family and your assets. Also, if you have any questions or comments, you’re welcome to call me at 303-974-4400. I’ll be pleased to speak with you over the telephone without charge.