Amazingly, six in 10 United States adults do not have a will or living trust, and almost half of boomers (age 53-71) haven’t put their estate planning documents in place yet. In my experience, most people fail to set up an estate plan because they simply don’t know they need one. Estate planning isn’t just for the wealthy; every adult needs some level of estate planning, regardless of their age or how many assets they have. In fact, if you don’t create your own estate plan, then you are automatically on the default plan that the State of California has in place for you, and you probably won’t like it.
The default plan involves probate court, either through a conservatorship proceeding or probate. A conservatorship occurs if you lose capacity to make your own decisions, and there is no estate plan already in place. If you find yourself in this unfortunate situation, then a judge must choose your decision-maker, or Conservator, in court. This can be a messy process where family disputes can unfold in the public eye, and legal fees can easily exceed $5,000 even in simple situations. If there are multiple people fighting to be the conservator, the process can easily cost over $50,000 in legal fees. It is important to note that no one, not even a spouse or parent, has automatic authority to make decisions for their loved one.
Probate occurs when someone dies with over $166,250 in assets or owning real estate. Probate is a process in which a judge oversees the transfer of the deceased’s assets to the deceased’s heirs. It sounds simple, but there is a lot of paperwork involved, and the process can take one year on average to complete. Like a conservatorship, it is also very costly. On top of probate court fees, the probate attorney and executor each receive a fixed percentage of your gross estate, not the net! For example, if the gross estate is worth $700,000—less than the average cost of many homes here—then the probate attorney and executor will each receive a fee of $17,000!
If you don’t have a will, then the law, in general, says that your assets will be divided among your nearest living relatives. This will be fine for some people, but not the case for others. This is especially true for blended families. For example, remember the Brady Bunch, the popular 1970s TV show? If Mr. Brady died without having his estate plan in place, all of his property would likely have passed to Mrs. Brady by law. If Mrs. Brady then died without setting up her own estate plan, then her three daughters would end up with everything she owned, and the three stepsons would have received nothing. Sadly, this is an all too common scenario in the real world.
If a conservatorship and probate don’t sound like good plans to you, then you need to take action! Simply put, you can get off the default plan by setting up a will or a trust to pass on your assets when you die, as well as having powers of attorney in place in order to name people you trust to make financial and healthcare decisions for you if you lose capacity. Clearly, setting up your own estate plan now is easier, safer, and more economical than letting a judge do it for you.
—Stephen Wood is an estate planning attorney with an office in Newbury Park