The Generations Legal Group Podcast

Estate Planning Essentials: Protecting Assets and Avoiding Probate

• Todd Whatley

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This episode focuses on the critical aspects of estate planning, highlighting the importance of avoiding probate for a smoother transition of assets. Key topics discussed include beneficiary designations, trusts, and the role of a knowledgeable attorney in navigating the estate planning landscape.

• Overview of what constitutes an estate 
• Discussion of probate and its challenges 
• Cost implications of probate for families 
• Benefits of using beneficiary designations to avoid probate 
• Limitations and risks associated with beneficiary designations 
• Advantages of establishing a trust for asset protection 
• Importance of having a knowledgeable attorney for estate planning 
• Need for regular reviews of your estate plan 
• Services offered by Generations Legal Group for legal assistance

Information to help you answer all of your questions about aging.

Speaker 1:

Welcome to Answers on Aging, the podcast dedicated to helping you navigate the complexities of growing older. Your host is Todd Whatley, a certified elder law attorney with a passion for empowering the aging community and their families, From finances and legal matters to health, long-term care and beyond. We've got you covered, Because every question you have we aim to answer. Dive into today's episode and let's uncover the truth about aging together.

Speaker 2:

That's right. This is Todd Rotley, with Generations Legal Group and the Answers on Aging podcast, and I am, as always, very thankful that you take time to join us, and today I want to talk about one of the things that I am extremely passionate about is making sure that people understand estate planning. Okay, and if you think estate planning is, oh, that's not for me, because I don't have much, stick with me. Okay, because you have an estate if you own anything, if you have a bank account. You have an estate if you own anything, if you have a bank account, even not much in that bank account, but if you have stuff you have in a state and you want it to go as efficiently as possible to the people that you want it to go to at the time of your death, and if you're not careful and if and honestly, if you get bad advice from other people, that transfer of assets from you to your heirs or to who you want to go through can become very convoluted, expensive and not what you want. Ok, so let's jump into it. So, to understand this, we are talking about probate, and my definition of probate is getting something unstuck from a dead person's name. All right, that's very simple. It means a person has died and they own some assets just in their name, like their home is just in their name, or a bank account just in their name with no beneficiaries, no co-owners, no anything. It's just they own a bank account and they pass away. If there's no beneficiaries, no co-owners, and it's just in your name at the time of your death. It is now stuck. Okay, we need a judge to tell us what to do with this stuff, and a bank or a title company is only going to recognize an order from a judge saying transfer these assets to this person. Okay, that process is called probate. Okay, it is court. You have to go to court and you have to get a judge to look at everything and transfer everything to the intended recipients. Transfer everything to the intended recipients. And what surprises people is a last will and testament is what tells the judge what to do with your stuff. A will is your road map through probate. You may think and I hate that a lot of attorneys are not more clear on this but if you go to an attorney for estate planning and their sole estate planning tool is a will and you do not have minor children, well still, if they only talk about a will. I really recommend you get a second opinion, Because a will is your roadmap through probate and if that's the only thing that you do to assure that your assets go somewhere else, you're going to go through probate.

Speaker 2:

Probate is bad, okay. Why is it bad? Three things. Number one it is expensive. It's court. There's is expensive, it's court. There's a judge. There's lawyers filing fees and in Arkansas, probate is very court involved. A judge has to basically approve everything that is done within the probate.

Speaker 2:

It is time consuming, okay, from your date of death until you can get through a probate that is uncontested and really nothing's going on. If it's a full-on probate, it's going to take a year, because there are six months within this probate that the probate sits still waiting for your creditors to submit all of their bills. So there's six months you can't do anything and it takes about three months to get up to that point and it'll take three months after that point to close out the probate. So you're, you are looking at a year and that's, if nothing goes wrong, ok. The other thing is it's court. And if there's going to be some problems within your estate with your beneficiaries fighting or some issues your probate. Your money has opened up the courthouse doors to let them come in and fight.

Speaker 2:

And number three, it is public knowledge. Anybody can go down to the Arkansas, to their county courthouse and pull up your probate proceedings and see who's getting what. Okay, you don't want that. Okay, we don't want any of those three things that I just talked about. And a will is the roadmap to do that, and so your sole estate planning tool should not be a will. All right, so how do we avoid probate? Okay, there were two very simple ways to avoid probate. One is very inexpensive and one is a little more expensive, but it gives you a lot more options. Okay, and a lot of attorneys won't talk about this option that I'm about to bring up, and that is beneficiary designations.

Speaker 2:

Every asset that you have can be made so that instantly upon your death, it goes to whoever you want it to go to. Ok, without the involvement of the court, without involvement of an attorney, it just simply goes where you say it should go on that item. What I mean by that is let's look at a bank account. You do a bank account and it's in your name. You can make that bank account payable on death to whoever that you want to go to your kids three kids. If you list three kids as the payable on death beneficiary, that account will go to your kids equally to those three kids, instantly. Once they can produce a death certificate, they walk into the bank, the bank writes them a check. It's done over with no court, no one-year delay, no expense. You can also do that with investment accounts. Typically with an investment account, it's going to be transfer on death, so they will transfer that account from you to your kids, not pay it out, but just simply transfer it. And you do that by telling them. Here's what I want you to do with this account Transfer it on death to these people. You do that. It's very cheap. It's very inexpensive.

Speaker 2:

On your house there is an amazing deed called a beneficiary deed that you can deed your house from yourself to your kids with this beneficiary deed. But this deed does not come into play until the time of your death. Now it does have to be filed. One of the requirements is this deed does have to be filed at the courthouse to be effective. But it sits there and it is not effective until you pass away and you steal on this house If you want to sell that house, you can. If you want to change your mind on that deed and not leave it to the people that you listed, you can do that.

Speaker 2:

And so what are the disadvantages of payable on death or beneficiary designations At the time of your death? It is paid outright to those people. Okay, whoever you list on there, it's going to be paid outright to them, so that it is their money. There's no protections whatsoever. It goes to that person free and clear. And so my concern is if they are going through bankruptcy, divorce or a lawsuit, the money that you just left them is going to be subject to those legal issues. Okay, now you'll probably hear a divorce attorney say no, no, no, inherited money is separate, it's not part of the marriage. But I will tell you every divorce attorney that I've talked to, once we get into the thick of it, they'll say it becomes an issue. Okay, legally it may be separate, but I promise you, if a wife just inherited a few million dollars from her parents, it's going to be an issue in the divorce, all right, and so leaving it to them by beneficiary is very convenient, it's very cheap, it's very quick, but you are leaving it to them outright, without any protections.

Speaker 2:

Number two it is typically equal to the beneficiaries that you list. I've heard of some banks, some places, allowing you to do percentages, but typically it's not percentages. They just say if you list two people as the payable on death beneficiary, it's going to go equally to those two people, half each. If you leave three people, it's going to be one third each. Okay, it's just a simple split of the account in equal distributions, and sometimes people don't want it to be equal, okay, and that becomes difficult with payable on death. And another thing is if a beneficiary that you have listed on that account or on your house or whatever, if they pass away different banks and different investment institutions and possibly title companies on a deed, they're going to look at that different ways. Either that person has died and so their interest is given up to the other beneficiaries listed on there, or they may say, well, their share goes to their children, but this has to go through probate, okay, and that is going to be a concern, and you don't want to have to file probate for a deceased child to get their share of that asset, okay. So there are some significant disadvantages to beneficiary designations, but it's there. It's an option and a lot of my clients choose that and it does work, okay, but there are those, those downsides. If any of those issues are a problem to you, then that's going to throw you into doing a trust.

Speaker 2:

A trust is a way to avoid probate, because a trust is a legal entity that can own property, meaning that you can transfer ownership from yourself to um, to the trust, and the trust will then own um, own those assets, okay, and the trust doesn't die when you pass away. The trust carries on, it's holding everything that you own and so therefore, it's not in your name. So it's holding everything that you own and so therefore, it's not in your name. So it's not stuck in your name. Okay, it is owned by the trust and it carries on after your death. Okay, and so a trust is really nice. Also, we can leave it to your children with protections. Okay, and I think that is one of the biggest selling points of someone who's trying to figure out should I do a trust, should I not? With a trust, we can have your trust create a trust for the benefit of your children and therefore it has the protections from bankruptcy, divorce and lawsuits. Okay, they're beautiful, okay and we can also do unequal distributions.

Speaker 2:

A lot of my clients sometimes they may want to leave a general 10% of their estate to the church or to some charity. Well, that's almost impossible to do with payable on death. To get that number accurate at the time of your death. It's very difficult to do that with payable on death designations. And so to make sure that 10% goes to your charity of choice, you almost always need a trust. Okay, of choice, you almost always need a trust, okay, okay. So that's a quick summary of wills.

Speaker 2:

Okay, goes through probate. They are inexpensive up front. Attorneys will do those fairly quickly and not charge you much. But they kind of understand that you're going to go through probate, okay, and you, the family, will probably come back to that attorney to do the probate and therefore they're going to make a substantial amount of money. So just so you know real quick the amount of money.

Speaker 2:

You know what you're probably thinking well, how expensive is probate? What you're probably thinking well, how expensive is probate? If you can get out for less than 5% of the estate, you're doing pretty well and with some issues like appraisals and different things, the cost of an estate to get through probate is somewhere between 5% and 10% of your entire estate. Well, that doesn't take much money. If you have a $100,000 estate, that's like not only not owning real estate but just having some bank accounts in different things. You're going to have $100,000 and 5% of that is $5,000. Okay. And you get to 10%, that's 10,000. Well, anywhere in Arkansas, particularly Northwest Arkansas, you're going to have real estate that's going to cost at least probably $300,000. And so 5% to 10% of that is $15,000 to $30,000 to get through probate.

Speaker 2:

You see why some attorneys will want you to do a will so that you come back and see them after you're gone. You can't fuss about it. The kids are like well, this is just what we're doing. It's just going to cost money to do that and the attorney gets to make tens of thousands of dollars from your estate. Take my advice and do either the payable on death beneficiaries or a trust. You will know the cost and your assets will go from you to your kids for relatively little money. Okay. Now If you have minor children, if you are listening to this and you have minor children, I will tell you you do need a will.

Speaker 2:

But the will, the sole purpose of the will, is not to deal with your money. Ok, the money is going to pass, either with payable and death beneficiaries or a trust. And I can almost promise you you're going to need a trust because of the kids, us because of the kids. But your estate will have to go to court to deal with the children, because only a judge can decide where your minor children are going to live. And you will do a last will and testament that will say if both parents pass away, we would like for these people to be the guardians of our children. And the reason I say you don't want the will to deal with your estate because, typically, unless you say something differently, your kids will then get all of your money on their 18th birthday. That's not good. So with a trust, we can change that and say, okay, the kids don't get their money or they will always benefit from it, but they won't be in control of it until they turn 25 or 30 or 35. Okay, we can put that in a trust and we can name who's going to be the guardian of the kids and, possibly separately, who's going to be in charge of the money for the kids. Okay, that's where the trust comes in. But you, you will need to do a will that tells the judge if my children are not of the age of majority, then these people need to be their guardians Okay, so you will need a will if you have minor children, okay, otherwise, you need to sit down with an attorney who's truly going to look at your best interest and figure out what you need to do.

Speaker 2:

And, like I said, I always bring up the payable on death beneficiaries because that's free. You do that yourself and if that works for you, if you're not concerned about some of those things we talked about, payable on death works for you, do it. Ok, it's very inexpensive, but a lot of our clients sit down and go through that and they will say that concerns me. Okay, I need to. I need to, you know, not let this happen. I need something else to happen so that these things are protected, particularly money going to the kids, keeping it until they're 25 or 30. But then also, even if your kids are grown and you're concerned about bankruptcy, divorce or lawsuits, then you need to be careful and do a trust so that we can protect the money for the benefit of your children and not someone else the money for the benefit of your children and not someone else.

Speaker 2:

You need to work with an experienced attorney who does this and knows all of these issues, not someone who happens to do 14 other areas of law. This is your life savings. You need to make sure that it's protected and that you're doing this correctly. Okay, and an experienced attorney is who you need to work for. At Generations Legal Group, I've been doing this for 25 years. Okay, you also need to review this somewhat frequently. I say every five years. Look at this, make sure that it's still doing what you want it to do. Make sure the laws haven't changed, issues haven't come up that will require an amendment to your estate plan.

Speaker 2:

You also the thing about trust. Doing a trust is doing the trust is only the beginning of the process. You've got to make sure that it is funded, okay. You've got to make sure that your things are in the trust so that the trust controls it. If your assets are not in your trust at the time of your death, chances are you're going through probate. Okay, and we don't want to go through probate.

Speaker 2:

In our office at Generations Legal Group, we have a dedicated funding coordinator who, depending on the trust package that you purchase, our funding coordinator will be there to help you make sure that the trust is funded. Okay, so it is crucial that you do something. You have an estate. If you own anything, you have an estate and you need to make sure this is done correctly. So we would love to work with you at Generations Legal Group. Please call the office.

Speaker 2:

Typically, your first appointment is going to be with our intake coordinator.

Speaker 2:

They're going to. They can answer a lot of questions. They are not an attorney, but they can answer some of your basic questions and kind of help you figure out what exactly needs to be done or help you with your appointment with the attorney to make sure that it is efficient as possible. Ok, so please call the office, set up an appointment with our intake coordinator. Coordinator. We will answer some questions there and then get the information that you need, and then you will meet with the attorneys, sign some documents, get the trust done, get it figured out and give you some peace of mind so that you know that this is being taken care of.

Speaker 2:

Okay, we would love to work with you. We would be honored. So visit our website, generationslegalgroupcom. There's a lot of good information there and, again, call the office at 479-601-4119. Give us a call and we would love to work with you. So share this with someone that you know who's thinking about estate planning, has some questions. Please share this with them and, as always, we would love to work with you and we'll see you next time.

Speaker 1:

Thanks, and that's a wrap for today's episode of Answers on Aging. Thank you for joining us on this journey of discovery and understanding. For more resources, detailed show notes and expert advice on the many facets of aging, don't forget to visit our website at wwwanswersonagingpodcastcom. Remember, growing older might be inevitable, but doing it with grace, knowledge and empowerment is a choice. Until next time, stay informed and keep those questions coming.