Read Online The 9 Steps to Financial Freedom by Suze Orman - Free Book Online Page A
Authors: Suze Orman
Ads: Link
$140,000 they actually have in it. But that’s not how it happens. Probate fees are based on the fair market value of the house at the time of death, which means what the value of the house is on the open market. In this case the fair market value is now $300,000. California probate fees for Jeff would be $15,000, plus another $1,000 or so in court costs—just to claim title to the house that he and his wife already thought of as his.
Probate fees vary from state to state—but you get the idea. Probating a will takes time and money, no matter what state you’re in. If your estate is very small, you might be able to avoid probate with a simple will. Assets valued at $10,000 to less than $100,000 (depending on the state) can be transferred to your heir by a simple process called
probate affidavit
. That costs very little, doesn’t take much time, and makes it easy for your survivors to receive what you want them to. Probate affidavit forms are available in most banks at no cost. Be careful, though. Your estate could be worth more than you think. See this page for assessing your net worth.
Keep in mind, too, that wills can be contested, which meansthat anyone who thinks he or she should have something that the deceased willed to someone else has the right to come to the court and ask for it. Then the judge has to decide. Also, although people commonly use wills to specify guardians for their children, this is merely a recommendation and is not binding. It only express one’s wishes. Even though Jeff is the legal father of his children, and even though the will expressed Nancy’s desire that he be their sole guardian, the legal guardianship of children always rests in the hands of the court. Nancy’s mother knew what she was doing when she flew to California to ask the court for the children. Will she get them? It’s unlikely, but the court will make its decisions based on whatever it feels is in the best interest of the children. Meanwhile, Jeff has to hire—and pay—a lawyer.
Could Nancy have arranged her affairs differently, to save all this agony and expense? At least some trouble could have been avoided if Nancy had set up a revocable living trust.
TRUSTS
REVOCABLE LIVING TRUSTS
What Is a Revocable Living Trust?
A
revocable living trust
is a legal document that identifies any assets that will be held in the name of the trust and also designates the person who will manage those assets 1) while you are alive (typically, this is you), 2) in the event of your incapacity, and 3) after your death.
How Is a Revocable Living Trust Different from a Will?
A will simply tells your loved ones and the courts how you want to distribute your money and property after your death. Itdoesn’t actually make the distribution happen. A court must do that. A trust is much more straightforward and flexible, for the simple reason that the court is taken out of the process. A trust lets you transfer legal title of your assets into the care of a trustee—usually yourself, but sometimes another person—and to name a
successor trustee
and beneficiaries. This way, assets quickly become the property of your beneficiaries upon your death. Most important,
they do not pass through probate
. The courts are not involved in the transfer of your estate.
Here’s how a trust differs from a will. Let’s say that my mother wants to leave me her home, just as Nancy wanted to leave her home to Jeff. The deed to the home is in my mother’s name. If she has a will, she will have stated her desire that I inherit the house. But when she dies, I have a problem. How is the title of the house going to be changed from her name into my name? That’s where the probate court comes in—a judge must read the will and approve the title transfer. If my mother leaves me the house in a living trust, however, and has signed the deed over to the name of the trust during her lifetime, probate on the house is avoided. The house comes directly to me.
A will
Probate fees vary from state to state—but you get the idea. Probating a will takes time and money, no matter what state you’re in. If your estate is very small, you might be able to avoid probate with a simple will. Assets valued at $10,000 to less than $100,000 (depending on the state) can be transferred to your heir by a simple process called
probate affidavit
. That costs very little, doesn’t take much time, and makes it easy for your survivors to receive what you want them to. Probate affidavit forms are available in most banks at no cost. Be careful, though. Your estate could be worth more than you think. See this page for assessing your net worth.
Keep in mind, too, that wills can be contested, which meansthat anyone who thinks he or she should have something that the deceased willed to someone else has the right to come to the court and ask for it. Then the judge has to decide. Also, although people commonly use wills to specify guardians for their children, this is merely a recommendation and is not binding. It only express one’s wishes. Even though Jeff is the legal father of his children, and even though the will expressed Nancy’s desire that he be their sole guardian, the legal guardianship of children always rests in the hands of the court. Nancy’s mother knew what she was doing when she flew to California to ask the court for the children. Will she get them? It’s unlikely, but the court will make its decisions based on whatever it feels is in the best interest of the children. Meanwhile, Jeff has to hire—and pay—a lawyer.
Could Nancy have arranged her affairs differently, to save all this agony and expense? At least some trouble could have been avoided if Nancy had set up a revocable living trust.
TRUSTS
REVOCABLE LIVING TRUSTS
What Is a Revocable Living Trust?
A
revocable living trust
is a legal document that identifies any assets that will be held in the name of the trust and also designates the person who will manage those assets 1) while you are alive (typically, this is you), 2) in the event of your incapacity, and 3) after your death.
How Is a Revocable Living Trust Different from a Will?
A will simply tells your loved ones and the courts how you want to distribute your money and property after your death. Itdoesn’t actually make the distribution happen. A court must do that. A trust is much more straightforward and flexible, for the simple reason that the court is taken out of the process. A trust lets you transfer legal title of your assets into the care of a trustee—usually yourself, but sometimes another person—and to name a
successor trustee
and beneficiaries. This way, assets quickly become the property of your beneficiaries upon your death. Most important,
they do not pass through probate
. The courts are not involved in the transfer of your estate.
Here’s how a trust differs from a will. Let’s say that my mother wants to leave me her home, just as Nancy wanted to leave her home to Jeff. The deed to the home is in my mother’s name. If she has a will, she will have stated her desire that I inherit the house. But when she dies, I have a problem. How is the title of the house going to be changed from her name into my name? That’s where the probate court comes in—a judge must read the will and approve the title transfer. If my mother leaves me the house in a living trust, however, and has signed the deed over to the name of the trust during her lifetime, probate on the house is avoided. The house comes directly to me.
A will
Similar Books
