ESTATE: The Golden Rules

Estates include instructions for how we want to be cared for in the hospital. Who we want to make decisions for us. And strategies for how we pay for (or don’t pay for) our last rounds of medical bills. 

And many other important things as we sail on the edge of the sea of life.

Twenty-five thousand dollars (a used car and a lightly-used savings account) can toss an estate into full probate in Massachusetts, Michigan, Minnesota, and Mississippi. Less even, in Georgia and other states. That’s fifteen months of hassle, headache, and expenses.

The piles of books and boxes and files and memories that we won’t tackle can drag down our children for years.

Planning the middle class estate is just as important as the rich estate. Maybe more because the wealthy pay for lots of attorneys and accountants… $20 billion a year by some reports.

It’s those of us in the middle who must be the most careful. We don’t have the extra time and money to fight off the mess.

A valid will

(1) Acts as a farewell letter to our loved ones,

(2) Declares how we want our remains cared for and paid for,

(3) Appoints guardians and resources for the care of minor children and pets,

(4) Appoints an executor to carry out our wishes, granting them specific rights to manage accounts and property, and

(5) Instructs the executor on the delivery of property owned exclusively by us.

If I die before my competent partner, a will in most states accomplishes three things:

(1) Acts as a farewell letter,

(2) Declares how I want my remains cared for and paid for, and

(3) Bequeathes personal property owned exclusively by me. Jointly-owned properly goes to the joint owner. Most everything that we personally own goes to our partner… unless we have clearly, legally stated otherwise.

A will is most helpful for clarifying our wants around complex, non-traditional families.

Families with young children (or pets) from multiple, non-traditional partners… with a home that we don’t want sold for cash… and with non-traditional assets (such as copyrights) can greatly benefit from a will.

Because… generic probate rules of inheritance are tailored for traditional, single-partner families. Also… probate looks at every thing as piles of cash to be split among sons and daughters and traditional family. 

Wills are oddly weak. They very often…

Age poorly: A five-year-old will unaware of who has died, who has been born, who turned out to be nasty, and what assets have been bought, sold, and changed in value can be worse than no will at all.

Make empty promises: An heir may be excited to learn they have been bequeathed $1 million, but they get nothing when the estate is worth only $1.

Act slowly: A $1 million beneficiary on a retirement account or an insurance policy can claim their asset in a few weeks. An heir must wait for the executor to follow the process outlined by the probate court. The probate process can take 4 months to 4 years and more.

Convey significant risk and liability to the executor: The executor who distributes $1 million to the heir before the probate process is complete can be held personally liable for returning $1 million to creditors. Executor is a job few really want. Or should want.

Probate courts exist to “prove” a will when there is doubt about ownership of a deceased person’s assets. Estates are typically entered into probate court when

(a) the estate exceeds the state-declared $ threshold of “probatable” assets or

(b) potential heirs are contesting ownership or

(c) potential creditors are seeking compensation.

Probatable assets are defined in state and federal law and court convention.

Most broadly, every asset that is not deemed to have an owner as of the moment of death is probatable. Furthermore, real estate in another state must usually go through probate in that state.

These assets are typically NOT probatable:

• Any asset with a named, living co-owner or joint-owner
• Life insurance with a named, living beneficiary
• Retirement accounts with a named, living beneficiary
• Brokerage accounts with a named, living Transfer on Death (TOD) beneficiary
• Banking accounts with a named, living Pay on Death (POD) beneficiary
• Any land, home, car, boat, or motorcycle with a legal deed that names another living person
• Any personal item that is already in the physical possession of another person

The American Bar Association states that “most probate proceedings are neither expensive or prolonged.” From the perspective of a profession that gets paid $400 per hour for proceedings that take years, the ABA is correct. 

Americans nonetheless detest the overarching probate process because it is archaic, slow, and expensive. Please read Estate: To my once darling child for the details. It’s a slow-burn story, “oddly enjoyable” according to Kirkus Reviews.

Most everything about the probate process feels awful:

1) An awful time. The process begins just hours after our loved one dies… when we provide information for the death certificate.

2) A long time. Courts are busy. Simple probate takes 3 to 6 months. Full probate takes months more, until the final court proceeding after federal taxes have been filed and confirmed. Full probate takes 15 to 30 months. Many years is common.

3) A tedious time. Every task requires multiple steps, and there are so… many… tasks… to wind down a life.

4) An expensive time. The fees set by most probate courts are rarely overwhelming, but the sum total of the court fees, notary fees, postal fees, attorney fees, accounting fees, burial fees, and the expenses to clean up a life do add up.

Estate: The Golden Rules answers this question directly. Estate: To my once darling child answers indirectly. Please read both and share them with loved ones.