Probating a will is time-consuming. Probate costs, along with estate fees, can significantly diminish the value of your estate – and decrease the amounts that your beneficiaries receive.
There is also a privacy issue. A probated will becomes part of the public court record. That means anyone who’s curious can read your will. They’ll see every every bequest you made. You might think that doesn’t matter. But it’s a serious loss of privacy. It’s been enough, in some instances, to tear families apart.
Consider the hypothetical case of Mary, a 79-year-old widow. Mary invested $200,000 in a portfolio of stocks and bonds. She intended to leave that money to her three adult grandchildren to help them buy their own homes. It’s now a year later. Mary has died – and market declines have dropped the value of her portfolio to just $150,000.
That’s bad enough. But there’s more. By the time Mary’s bequests are passed on, her estate will also be subject to the following fees:
Probate of 1.4% $2,100
Executor fees of 2% $3,000
Legal fees of 2% $3,000
Accounting fees of 2% $3,000
Mary’s legacy is now worth just $138,900. That’s considerably less than the $200,000 she thought she was leaving. Mary’s lack of proper planning has cost her grandchildren $61,100 – over $20,000 each! And, since it’s being probated, the will is now open to challenge by any or all of her adult children. The potential is there to create huge rifts between family members.
What Mary should have done was create a segregated fund, naming her grandchildren as beneficiaries. The fund’s 100-percent death benefit guarantee would have ensured that her grandchildren received the greater amount of either her initial deposit, or the fund’s current market value.
And, naming beneficiaries within the fund would have also avoided paying any probate or estate fees, along with a quicker payout – usually within two weeks of a written notification of death, compared with up to three months or more for probate.
In addition, Mary’s bequest through the segregated fund would be private. This would minimize any potential for conflict, and ensure that her final wishes were respected. Not only that, but had Mary used a segregated fund, her grandchildren would be guaranteed to receive a minimum of $200,000!
How does this compare with the plans you have for your estate?
Read more blogs+