Estate Planning
Let's start with the basics. First, what is your estate?
Your estate is simply everything you have accumulated during your lifetime. That includes real estate, stocks, bonds, retirement plans; everything you own. Estate planning, then, is the planning necessary to manage your estate during your lifetime and to provide for its proper distribution upon your death.
Challenges associated with Estate Planning
Estate planning offers a number of challenges.
The first challenge is finding the right attorney. Unfortunately, many people are intimidated by them. People are afraid that they won't choose the best attorney or that their attorney will somehow take control of their assets. As a result, many people avoid necessary estate planning. Attorneys are an essential part of your estate planning team.The second estate planning challenge is reducing estate taxes. When you pass away, the state and federal governments may take a healthy piece of everything you leave behind, significantly reducing the value of the estate your heirs receive.
The final challenge is probate. Probate is the court supervised process by which a decedent's estate is distributed. During probate all creditors are paid from the estate's assets and any questions concerning the validity of a will are resolved.
Finally, title to estate assets is transferred from the name of the deceased to the names of his or her beneficiaries. Of course, all the probate court's "help" comes with a price. Attorney's fees, appraisal fees, the executor's fees, publication and court costs all must be paid out of the estate. Depending on the laws in your state, the size of the estate, and the manner in which property is owned, probate and administrative fees can consume approximately five to ten percent of the gross estate. And probate can last a long time, anywhere from one to two years. Your heirs will have to wait to receive the bulk of their inheritance until probate is concluded.
Another drawback of probate is that the proceedings of the probate court are public record. This means that anyone can go down to the county courthouse and find out what is in your estate, to whom you are leaving it, as well as how much you owe and to whom. In fact, some salespeople actually use probate files to obtain leads.