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The Estate Plan
By Dominque Vessigault
Part 1 of 3
Henry Abts’ father suffered an untimely death. Henry, as a young man, was called upon to be the administrator of his father’s estate. Following the unpleasant and agonising experience he had with the probate system in the state of California, Henry wrote the Living Trust with the avowed purpose of educating the American public to the evils of probate.
Every state in the United States of America has its own unique probate system. These anachronistic systems historically have had a corner on the administration of decedents’ estates and thus have stubbornly resisted reform. Throughout the twentieth century there have been a number of well-intentioned efforts to modernise probate systems in the various states, but these efforts have largely failed.
The Revocable Living Trust
The popularity of the revocable living trust as opposed to a Will, and the probate system is not hard to explain.
This is the picture in my home state of Nevada, and Nevada is fundamentally similar to the other 49 States in terms of probate. In Nevada, as in every state, if you die with a Will, your estate will go through probate. And what is probate? In Nevada probate will take 30 months of your time (if all the heirs get along – otherwise it could take longer) and 5 to 8 percent of the value of your estate.
To make that point come home to you, write down what you would conservatively estimate the gross value of your estate to be. Now, multiply that figure by .05. The result is a conservative estimate of what probate will cost your estate. In the metropolitan areas of California and most of the larger states where the probate dockets are crowded, the time in probate can easily be extended beyond 3 years.
However, if you have a revocable living trust then, the settlement process will generally be over in about a month and the settlement cost will rarely exceed US$1,000. And thus you will see why revocable living trusts have become so popular.
Who Needs a Living Trust?
But, you say, “my brother-in-law who is a lawyer, or my sister who works for a probate judge or my banker, tells me that because my estate is worth less than US$1.5 million I don’t need a revocable living trust”. In response, let me be as clear as I can be; “your brother-in-law, your sister or your banker told you wrong.”
If your estate is worth less than US$1.5 million there may be no federal estate tax liability when you die that is the least of your worries. If you do not have a revocable living trust your estate will go through probate. And not only that; if you own property in any of the 22 States; and the district of Columbia that have recently passed their own estate tax laws that have much lower exemptions than the Federal US $1.5 million exemption, your estate will likely pay some easily avoidable estate taxes levied by those states.
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