It is said that nothing is certain except death and taxes.
Yet many Americans know surprisingly little about the legal process that occurs after a loved one’s death.
A new report titled, “The State of Probate in America,” finds that many Americans are misinformed about basic probate facts. From a representative survey of 1,000 adults, the report found that:
◾ More than half of Americans don’t know how much probate costs.
◾ Fewer than half of people understand that inheritance is not automatic.
◾ Only 2% of respondents know how long it takes to sort out an inheritance.
The findings of this study were obtained from a study Released this month It’s from Trust & Will, a digital estate planning platform.
The report suggests that many Americans don’t fully understand the time and expense involved in probate, or why it’s even necessary.
“I think one of the most common misconceptions is that probate is not a big deal.” Kelsey SimaskoDetroit Elder Law Attorney.
That’s right: Probate takes about 20 months on average, according to a report from Trust & Will, but only 2% of survey respondents understand that timeline.
“This is not going to be a few weeks. It’s definitely going to be a few months.” Mitch Mitchellproduct advisor at Trust & Will. “If you take this on, it becomes a full-time job.”
Americans don’t know how much probate costs
More than half of survey respondents said they didn’t know how much probate would cost, and only 4% thought it would cost more than $10,000.
According to Trust & Will, probate typically costs between 3% and 7% of the value of the estate, so for a $500,000 estate, costs could range from $15,000 to $35,000.
“I’ve rarely seen anyone overestimate costs,” he said. Jonathan SwanbergCertified Financial Planner in Houston.
Overall, more than half of survey respondents admitted to not fully understanding probate. Still, 52% said they knew probate was difficult.
“They tend to be afraid of it because they’ve heard horror stories,” says Seth Mullikin, a certified financial planner in Charlotte, North Carolina.
Fear of probate could disrupt big wealth transfers
The fear could cause chaos for years to come.
As baby boomers reach retirement age and control roughly half of America’s wealth, researchers predict an unprecedented intergenerational wealth transfer over the next 20 years — as much as $84 trillion could be transferred.
Much of the money will go to millennials, those born between 1981 and 1996, many of whom are unprepared.
A related report from Trust & Will states: One-third of millennials They don’t know if their parents have an estate plan. Other survey findings include:
◾ Only 58% of millennials have discussed estate planning with older relatives.
◾ 62% of millennials do not have a will or trust of their own.
Estate planning experts cite two big reasons why we are so unfamiliar with the probate process in general, and our own family’s estate planning in particular.
Many people only go through the entire probate process when the last parent dies. The death of the first parent in a married couple is relatively straightforward, at least from a probate perspective.
“You’ll probably only go through this process once.” Corinne DayCertified Financial Planner in St. Louis.
“It’s an awkward conversation.”
Second, many adult children find it distressing to discuss death and inheritance with their elderly parents.
“It’s an uncomfortable conversation,” Mitchell said.
But this is an important discussion to have. Probate laws vary from state to state, and even within states.
“There are 254 counties in Texas,” Mitchell says, “and each judge determines how the will is formatted, so there are at least 254 different ways probate can be processed.”
State laws also vary as to what happens if you die without leaving a will, and such a scenario is becoming more common.
According to the Center for Retirement Research at Boston University, the percentage of households aged 70 or older that have wills or trusts has been steadily declining. Between 2000 and 2020, that percentage dropped to Decreased from 73% to 64%.
A will or trust directs how property and other assets are distributed when a person dies. If you die without a will, the court takes over.
However, probate laws vary, and it can be difficult to predict who will get what.
If a New York resident dies without a will and leaves behind a spouse and biological children, the spouse will inherit the first $50,000 of the estate and half of the remainder, with the remainder going to the children. analysis From Trust & Will.
In Florida, in the same scenario, the spouse would get all of the property.
For those who are confused by how probate works or afraid to talk to loved ones about estate planning, here are some tips from the experts.
Create an estate plan
Retirement experts say most adults should write a will as part of a larger estate plan that specifies not only what happens to their assets after they die, but also who will manage them in case of an emergency while they’re still alive.
Consider Hiring an Attorney
Most experts say you should create your estate plan with an attorney because estate planning is complicated and you want to avoid making mistakes.
Other experts say it’s okay to prepare a will without a lawyer, especially if cost is an issue. Having a will is better than not having one, they say.
Online estate planning services can help you prepare a will for about $160, according to the National Council on Aging. The nonprofit organization says: Online Guide.
Talk about your will
Many adult children grimaced at the thought of asking their parents who would inherit what.
That’s why experts say older parents should initiate the conversation themselves.
“It’s probably a lot easier coming from an older generation.” Harry MargolisBoston Estate Planning and Elder Law Attorney.
If you have multiple kids with busy lives, Margolis says try getting them together over Zoom.
Beneficiary Name
Investment accounts and life insurance policies often require you to designate a beneficiary, a loved one who will receive the money when you die.
For many of us, beneficiary designations act as estate planning, meaning they are legally binding and determine what will happen to the majority of our assets.
Experts say designating beneficiaries now can greatly simplify the probate process later, or even allow your loved ones to avoid it altogether.
Where is the inheritance?Why older Americans are no longer writing wills or estate plans
Prepare your estate planning file
When you die, you leave behind a tangle of information – utility bills, bank accounts, passwords, PIN codes – for your loved ones to decipher.
Create a file on paper or on your computer and start collecting information now, from your Netflix password to the location of your last known hidden key. Update the file as needed.
“I call it a treasure map,” Simasko said. “What you have and where it is.”
