Posted by: 1of10boyz | January 29, 2013

Estate Planning and Paranoia


I am way overdue to fix my estate. This whole trip to China caused me to revert to my military preparation programming. Anytime we got ready to deploy we always got that “talk” about making sure the paperwork was in order. Only this time I decided I would do something a little more thorough and potentially effective than a will. Sadly, my last will was something like 20 years ago.

I checked out my options and talked to some lawyer types. I decided to do a thorough (enough) review and fix my estate. Yes, I know I still freak out sometimes when I think about being in China. My mind still tells me there is something wrong with being in Communist country. Even now, almost 2 years after moving here, I get those weird and maybe crazy feelings that it is wrong to be here.

I guess there might be some that would call it the onset of anxiety or maybe even and anxiety attack. Nothing that is disabling mind you but it is kind of unsettling. I don’t KNOW if the Chinese are spying on me but I have am not surprised if they are. I believe that the car is bugged (you know the driver turns off the radio whenever we are talking – maybe he is just trying to be polite). I believe the house is bugged (we hope that there isn’t a camera but heck who knows). I am certain (KNOW – OK maybe that is too strong a word) that our email and internet usage is being monitored or actually copied and stored. I really wished that I was a spy so that I could really figure out how many ways they are really monitoring me. I guess it is probably better not to know.

Ok, back to my planning for being out of the country. I needed to get a better idea of what my options are and what they are going to cost me. Here is what I found out from my lawyer. It may be an over simplification of the difference between the pros and cons of a trust versus a will, but it should give you enough to make a decision.

 Pros Will

 Simple to draft.

Relatively inexpensive – usually $175-$200.

 Cons Will

 Probate. Wills have to pass through a process known as “probate” upon the death of the testator (person making the will).   Depending on the value of the assets, probate can be very expensive to your heirs.   Wyoming statutes set the fee for lawyers on probate at 2% of the value of the entire estate.  This means if your total estate is worth $500k, your heirs pay $10,000 min. in attorneys fees.

 Probate. Probate can take years to finalize in the court.

 

Wills must be destroyed if you change your mind on disposition of assets to heirs. A new will needs to be drafted if you want something different or your circumstances change.

 Pros Trust

 Easily changed.  Settlor (person making the trust) can do an amendment to the trust.

 No probate. Because the assets were “given away” prior to the death of the settlor there is no need for probate.

 No probate expenses.

 Cons Trust.

 Usually more complex than a will to draft.  Cost $900 and up depending on the complexity. I have had very few trusts cost more than $900.

There are various types of trusts depending on the extent of your wealth. Larger estate plans may call for a combination of trusts and limited partnerships in order to avoid estate takes.

 I did end up with a trust. I am quite happy about it. There are some other downsides to a trust that I didn’t know about. The taxman treats those trusts a little but I think I can navigate those challenges now much better than having my posterity trying to navigate them later. It is a small sacrifice in the long run in my opinion.

Now if I can just get used to being spied upon.

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Responses

  1. As you probably know, Federal estate taxes are 40%, but don’t apply to the first $5.25 million for those dying in 2013. (The exemption is adjusted for inflation.) If I recall correctly, it’s applied to your GROSS estate, including the face amount of life insurance you own. If you have five million in real estate and investments and 2.25 million in life insurance, you’d owe $800,000 in estate taxes (40% of the 2 million over 5.25), even if you’ve got an $8 million mortgage.
    Wyoming has no estate taxes.

    • The whole federal estate taxes thing was what really pushed me into a trust arrangement. I currently wouldn’t need to worry about gross amount unless the accidental death policies kicked in at my demise. The real challenge is that at this point in my life my actual net worth is growing much fast than it had while I had a houseful of kids eating thousands of dollars worth of food each year. The government is also not likely to increase that threshold in the foreseeable future since most people can’t imagine getting to that point under any circumstance. The hope with a trust is to avoid some of that expense by planning for it and transitioning assets differently. I guess that in most cases the legal jargon just really kicks the can down the road just a little further. I suspect that I have a lot still to learn about how effective a tool the trust is at mitigating the long term exposure for my posterity.

  2. Next time you need your estate planning done, I work with an estate planning attorney that will do all of it including trusts for $750. He was the attorney general for the state of Oregon for nearly 20 years.

    • I got my trust for $800 so I guess I did alright. Pretty happy with all of the documents that went along with it. So many other little legal documents that I had thought about in the past, like living will, etc. were included in that. Much better than the recurrent problem that a will puts you in. Hopefully, I can keep abreast of the changes that need to be made over the next few years so that the loved ones in my life are protected from unnecessary expenses related to a transition if it were required.


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