In a recent meeting with a wealthy family they told me their estate planning attorney recommended not even using their trust and allowing their $10 million dollar estate to pass through probate court when their kids inherit the family wealth. This lawyer told the couple that probate court is easy in their state.
Fire your Lawyer and Get a New Attorney
If your estate planning attorney is counseling you to let your wealth pass through probate court, fire the attorney and find a new one. When the lawyer says, probate court is easy, they are referring to the work being easy for them, not for your kids. The lawyer is spending your money, without your permission. Probate court is not free, it takes time and more importantly it is a public record. Do you want the public to be able to find out how much money your kids are inheriting? Blackmail, theft and kidnapping for ransom does happen to wealthy people. Why would you ever want your family financial details to become a public record?
Estate Lawyer Conflict of Interest
The estate lawyer has a conflict of interest when they tell you that probate court is ok. Here is how the conflict arises. When you pass away, your kids will go to your safe and find your will or trust if you have one. The lawyer’s contact information will be with your estate planning documents. Your kids, who are likely to be overwhelmed, will call the lawyer and say, my parents are gone and I need your help. If your trust is funded or if you have beneficiary deeds and designations on all your assets, then there is no work for the lawyer to perform. Your kids can go directly to the custodians of your money, give them a death certificate and the custodian will shift the funds over to your kids, immediately. No probate, no fees, fast and private. But if your wealth needs to go through probate court, now your kids have a dilemma. Do they go to the probate court themselves and handle the court process, forms and headache that goes along with probate court or do they simply hire your attorney to do it for them? Most of the time your kids will just hire the attorney.
No Future Billing for the Attorney if…
If the lawyer helps you fund your trust and add beneficiary designations to your assets while you are alive, they are effectively putting themselves out of work in the long run. But if your lawyer encourages you to allow your wealth to go through probate court, there is a high likelihood the lawyer will get paid again at some point in the future. The probate court work is easy for the lawyer. They are performing administrative work for legal rates. Keep in mind that these costs can really add up too. I have seen plenty of estate administration bills in the tens of thousands and even six figure bills, throughout my career. The more your kids lean on the lawyer, the higher the bill goes. An estate lawyer can earn far more in fees from a large estate administration case than they can drafting a simple will and trust.
Ethan S. Braid, CFA
President
HighPass Asset Management
Denver, Colorado
This article is for education and illustrative purposes and is not tax, legal or financial advice. Your broker or advisor will charge you fees or commissions to make investments and therefore your returns will be less than indexes. For example, if you invest in the S&P 500 ETF, SPY, you will pay a fee to the company managing the ETF, State Street Global Advisors. Your return on the S&P 500 ETF, SPY, will be less than the SS&P 500 Index TR because of the fee paid to State Street Global Advisors. Additionally, you may pay a fee or a commission to your broker or financial advisor, further reducing your return, below the index. Consult your advisor or broker for a detailed list of their fees or commissions before you invest. Investing involves risk and you can lose money.