Estate Planning is Important

Estate Planning is Important

| Feb 4, 2021 | Firm News

In simple terms, “Estate Planning” is writing how you would like your assets to be disbursed when you die. There are many legal devices/documents that can be used for estate planning. Most commonly, estate planning includes Wills, Medical and Financial Powers of Attorney’s, Health Care Directives, and in many cases Community Property Agreements.

A “Probate” is the legal process where assets are collected and distributed, when there is a written Will. An “Administration” is the legal process where assets are collected and distributed, when there is no written Will.

A Probate/Administration estate is made up of the assets of the deceased person. In Washington State, a Probate or Administration is required when, the estate’s value exceeds one hundred thousand dollars ($ 100,000.00), or when the estate includes real estate (house/land).

An Administration (an estate without a Will) is expensive when compared to a Probate (an estate with a Will). The added expense of an Administration is driven by the fact that the court typically requires an Administrator to post a bond, and the court will likely require that the Administration be handled with the court’s regular intervention.

Court intervention means that most, if not all the actions of the Administrator, must be approved by the court. Court approval requires motions to the court and court hearings, which drives up legal fees, and makes the process more expensive.

Administrations are also not preferable because when there is no written Will the court gets to decide who will be the Administrator of the estate and how the estate’s assets are distributed per a statutory scheme. If the assets are distributed per a statute, they are not necessarily going to the folks that the decedent wanted to receive, or in the amount the decedent desired.

When there is a Probate (a written Will), the decedent gets to choose who handles their estate, and, perhaps most importantly, the decedent specifies who gets the estate’s assets. In addition, the decedent can specify in their Will that they do not want court intervention, and that they do not want the court to require a bond, thereby driving down the cost for handling the estate.

In some states, Probate is feared because it is expensive. Residents of California frequently employ Trusts to avoid the expense of Probate. The expense of Probate is not to be feared in Washington State.

In Washington State the Probate of a Will is a relatively inexpensive, and expedited procedure. Unless there are extreme and clear reasons for employing a Trust, for example, federal death tax planning (exemption currently set at eleven million five hundred eighty thousand dollars ($ 11,580,000)), or to exercise control over the estate’s assets from the grave where the beneficiaries cannot be trusted to use the estate’s assets wisely during their lifetime.

Finally, for a married couple, the utilization of a Community Property Agreement is a fantastic way to automatically shift all the assets to the surviving spouse without a Probate. This saves a married couple the hassle of their assets going through two Probates, frankly, no surviving spouse wants to deal with the stress and anxiety of handling a Probate for their deceased spouse while they are grieving.