With much discomfort I have been forced to watch the Anna Nicole Smith probate proceedings and much more information than I wanted to know about Anna Nicole’s life events. Her reported death was everywhere: on TV, in print, magazines, online and everywhere else you can imagine. The media has made a circus of showing the legal battle going on in open court about the six-year-old will and interpretation thereof.
Can it ever happen to you?
Yes, if you only leave a will. A will does not avoid probate. A will does not eliminate the estate tax. If you die with a will or without a will your personal and real property has to go to probate. If you have property in more than one state, each states’ probate court has jurisdiction to probate the will.
What’s a probate? Why does a Will need to go through Probate?
Probate is a public process whereby a local court of jurisdiction (probate court) assumes the responsibility of determining who gets what. The court will determine the legitimacy of your will? Was it written with undue influence? Is it the last will? Who is the true executor (i.e. the person who will make the distributions under court jurisdiction)? Did it assign custody for minor children?
The probate court will take inventory of your personal and real property. In addition, the probate court will assign and investigate claims made against your property from potential and real creditors and even assign accountants and lawyers to drag the process.
So why have a will at all? What good does it do?
There are two legitimate reasons for having a will. The will enables:
(1) The assignment of a custodial guardian of minor children.
(2) The assignment of an executor.
The assignment of choosing a guardian for your minor children is the most important aspect of having a will. Choose your custodian well, based on the love of your children as if you were going to be there. Traditionally, you would not choose the executor of your will to be the guardian of your minor children.
There’s a balance to be had between the Executor and the Guardian of your children. The Executor would have some degree of control if there were to be any uncontemplated issues, later in time. All other aspects of the will can be highly contested by anyone having an interest in the outcome of any distributions. Even a very well drafted will becomes a public document and must go to probate in each state where the decedent had property.
What can one do to avoid the type of circus Anna Nicole Smith had over YOUR assets?
Aside from the custody of minor children, a will does not provide any type of safety net over your assets. Only a Trust will avoid this public disclosure of what should be a private matter between you and your assets you leave behind. So a simple answer to this question – get a consultation with qualified Estate Planning attorney and create a trust!
What is a Trust?
A Trust is a Contract. If you choose to be private about your private matter, a Trust, any Trust, will avoid probate; revocable or irrevocable, grantor or non-grantor type Trusts will avoid the probate process. A Trust is not just for the rich. Any one with $100,000 or more should have a Trust.
What type of trust is best suited for my needs?
A perfect Trust for under $500,000 is a Living Trust, or a Revocable Trust to avoid the probate process. Any one with significant assets should have an Irrevocable Trust. While any Trust will avoid the probate process, only an Irrevocable Trust will avoid the probate process and also avoid the inheritance tax or the estate tax.
What’s the difference between Revocable and Irrevocable Trust?
Revocable Trust: With a Revocable Trust the word “revocable” means that you have sufficient strings to revoke the contract; nullify and void it. While it will avoid going to probate and drag your dirty linen through the public process, it will not avoid the inheritance/estate tax, because on the date of your death you still owned your assets in your name.
For purposes of taxation and civil liability the “revocable” strings attached, means that you did not give up power to control and “own” on a long-term basis your assets; therefore, you are the “deemed” owner of the assets. The Estate Tax is based on what you own in your name at the date of your death. So, the Probate Process is about who gets what; the Estate Tax is about who owns what and what’s it worth for the purpose of taxation.
An Irrevocable Trust: An Irrevocable Trust is a Contract whereby you give up “any ownership claims” against your assets repositioned/transferred from you to your Irrevocable Trust. The key to dissolve your ownership claims is with an Independent Trustee.
Your “Trustee” must be “independent.” The Trustee cannot be you and it can not be the Beneficiary. (If you are the Grantor of such trust, your wife can be the Trustee and your son/daughter can be the Beneficiary. However, your wife can not be a Trustee and a Beneficiary in the Irrevocable trust).
As mentioned before, no matter how well drafted, a will must go to probate where it becomes a public document for every interested party to view and review. The only method of avoiding the probate process is to have your possessions and valuable assets titled to a Trust.
Though the tragedy of Anna Nicole Smith and her baby daughter’s plight cannot now be avoided, we can learn from this situation and apply remedial steps to our own life. Here are some things for you to consider in your life:
• All Trusts, revocable or irrevocable, grantor or non- grantor avoid Probate.
• A will does NOT avoid Probate.
• A will does NOT avoid Estate Taxes.
• Only an “Irrevocable Trust” avoids Estate/Inheritance Taxes.
To learn more how you can prevent Anna Nicole Smith’s situation and protect your assets, schedule consultation with leading Trust and Estate attorney, Inna Fershteyn today or sign up to attend free Trust and Estate Planning conference which will be held on December 15 at 6:30 PM at 8622 Bay Parkway, Suite 2C. To register, call (718) 333-2394.