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Which Case Will Your Family Be In?

January 20, 2019 in Uncategorized | MARTIN WREN, P.C. | LEAVE A COMMENT

Which Case Will Your Family Be In?

Case 1

A husband and wife have been married for 25 years. They have retired to Florida from New York and have approximately $1 million in assets. The assets consist of a home in Florida worth $250,000 (owned in the wife’s revocable trust), two brokerage accounts worth $250,000 each (owned in each spouse’s revocable trust), and a joint checking account worth $250,000.

Unfortunately, the husband has a heart attack and dies. His revocable trust left everything to his wife. The wife consults with her attorney. The attorney informs the wife that all that needs to be done is to re-title the joint checking account into the name of her revocable trust and to contact the brokerage firm and notify them that her husband is deceased and that she is the sole beneficiary. As sole beneficiary, she can re-title the brokerage account into the name of her trust. The attorney charges $1,000 for the consultation and agrees to assist in the re-titling by helping to fill out forms and answer questions.

Three months later everything has been resolved, and the wife went through almost no additional stress during the process.

Case 2

A husband and wife have been married for 25 years. They have retired to Florida from New York and have approximately $1 million in assets. The assets consist of a home in Florida worth $250,000 (owned jointly), two brokerage accounts worth $250,000 each (owned in each spouse’s sole name), and a joint checking account worth $250,000.

Unfortunately, the husband has a heart attack and dies. He had a will that left everything he owned to his wife. His wife hires an attorney to handle the estate. The attorney informs the wife that they will have to open a probate for the assets that her husband owned in his sole name. The attorney’s fee for the probate is $5,000 or 2 percent of the probate estate, which is $250,000. The attorney also informs the wife that there will be various court costs associated with the probate administration, which will total several hundred dollars (significantly less than if her husband had died in most other states). Finally, the attorney informs the wife that she needs to re-title the joint checking account into the name of a revocable trust to avoid a probate when she passes away.

Nine months later the probate court closes the probate. The wife has dealt with over $5,000 worth of unnecessary costs, having $250,000 worth of assets tied up for six additional months, and all the stress that came along with her husband’s death.

Case 3

A husband and wife have been married for 25 years. They have retired to Florida from New York and have approximately $1 million in assets. The assets consist of a home in Florida worth $250,000 (owned jointly), two brokerage accounts worth $250,000 each (owned in each spouse’s sole name), and a joint checking account worth $250,000.

Unfortunately, the husband and wife die in a car accident. Both had wills that left everything to their only son. The son lives in New York. The son flies down from New York and meets with the attorney. The attorney informs the son that all of his parents’ assets have to be probated. The attorney’s fee for the probate is $20,000 or 2 percent of $1 million. The attorney also informs the son that the court will likely require a $25,000 bond, because he is not a Florida resident. Additionally, the attorney informs the son that various court costs are associated with the probate administration, which will total several hundred dollars (significantly less than if the husband and wife had died in most other states). Finally, the attorney informs the son that he will have to petition the court to sell his parents’ home and that it could take several months to get approval.

Twelve months later the probate court closes the probate. The son has dealt with the loss of both his parents, the sale of a home, and an arduous court proceeding. Revocable trusts would have prevented so many costs and saved much time and emotional strain for the son.

These three case studies show how expensive and time-consuming probate can be. Nonetheless, the cases cannot illustrate the emotional strain a probate proceeding can place on the survivors.

Simultaneous Death

Case 3 shows why joint ownership is not a substitute for a trust. Joint ownership does not avoid the problem of simultaneous death. The reason joint ownership avoids probate when one spouse dies is that someone has survivorship rights. When both spouses die at the same time, there is no survivor. The common disaster, as it is often referred to, is a contingency that most people do not account for. The living trust is the best way to plan for a common disaster.

A common disaster is not the only way that joint ownership can result in probate. Another example is when one spouse dies and the other dies soon after. If the surviving spouse has not re-titled the asset in the name of the trust or designated a beneficiary, a probate will be required. The living trust is the best way to take care of these problems all at once.

If you are interested in learning more, don’t hesitate to call an estate planning lawyer Palatine, IL offers who can help guide you through the process.

 


 

Thank you to our friends and contributors at Bott & Associates, LTD. for their insight into estate planning and various cases you could find your family in.

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