Estate Settlement Costs

Unfortunately, settling an estate isn’t as simple as selling mom and dad’s house and splitting the proceeds. Nor is it a matter of presenting the bank with a death certificate and closing their accounts.

It’s much more complicated than that. And often, much more expensive.

Costs vary greatly depending on the type of legal documents you have (a will or a trust), the size and composition of your estate, and who is inheriting your assets. We’ve listed some of the most important factors that play a role in determining the cost of settling most estates.

Probate Expenses

Many people believe that by having a will, their estate will avoid probate. This is a common, and expensive, misconception. If you have a will, your estate will go through probate, regardless of what you may have been told. And unfortunately, it will be expensive – sapping funds that could otherwise go to your family or favorite charity.

Probate is the legal process granting a person the authority to settle an estate by of proving that a will is valid. It may sound simple, but it’s not.

Generally, probate begins when the will of a deceased person is given to an attorney. The attorney then delivers it to the probate judge at the county courthouse and then the legal process is begins.

Next, legal notices are run in the newspaper notifying creditors that the deceased has, in fact, passed away and that claims on the estate may be filed. Only then, approximately 6 months later, the bureaucratic process of probate begins.

Finally, the executor of the will is provided legal documentation granting the authority to close investment and bank account, sell real estate and distribute assets to the heirs.

An AARP study found that probate proceedings ate 5-10% of the average estate’s value.* That can translate into a lot of money. After all, the value of your estate adds up quickly (consider your home, vehicles, financial assets, and personal property) Even on a moderate estate of $700,000, probate expenses could exceed $50,000.

There is good news, however. Probate expenses can be completely avoided with a revocable living trust. To learn more about living trusts, see Wills vs Trusts.

Federal Estate Tax

For high net worth families, this is the most expensive cost when settling an estate. In 2013, a married couple with a well-designed trust could actually exclude $10,500,000 ($5,250,000 individual) from federal Estate tax. The tax rate above that amount would be 40%.

In Summary

You may not love the idea of planning your estate, but it’s worth taking the time to get right. By making smart decisions today, you can help your family avoid huge expenses – and huge headaches – in the future.

Simple errors or omissions in the planning process can have a dire impact in the years to come. That’s why it’s so important you work with a partner who has the experience and the knowhow to get the job done right. A SecurEstate, we’ve been helping clients plan their estates for years.

Our goal is help you find ways to minimize costs while helping you see to it that your wishes are met. For us, it’s an honor to help you preserve and pass along what you have worked a lifetime to accumulate.

*Source: “The Living Trust” by Henry W. Abts III, appendix H

Securities and advisory services offered through National Planning Corporation (NPC), Member <a target=”_blank” href=”http://www.finra.org”>FINRA</a>/<a target=”_blank” href=”http://www.sipc.org”>SIPC</a>, a Registered Investment Adviser SecurEstate and NPC are separate and unrelated companies.