Dying isn't fun. What's worse than dying is the emotional, financial, and legal mess that you've left your family to navigate. That mess is the actual cost of probate.
As a real estate investor, you've planned and prepared all your life. Don't drop the ball in death.
Do you want to leave your family in a stable financial situation when you kick the bucket? Do you want to care for your spouse and kids after you shed loose your mortal coil?
Taking care of your heirs, sound like you? You're exactly in the right place.
What I'll show you is the cost of probate on an estate. I'll also reveal how to avoid probate's legal and financial pitfalls.
That's important for a real estate investor because your estate may be larger than average. With that larger estate comes the potential for a larger legal and financial headache.
Keep reading to learn more about the cost of probate. You'll also see some practical and actionable steps that you can take to protect your estate.
Probate is the legal process to prove the validity of your will. When you die, the court-appointed executor of the will executes the probate process.
The executor will collect all the dead person's assets, pay debts, and divide the estate between the beneficiaries. The executor and the court ultimately determine the final verdict on how to distribute your assets. Not you. Not your loved ones.
The true cost of probate is both time and money. For instance, probate potentially lasts up to a year.
Additional time costs of probate include:
That's the best cast scenario where you have a will and named beneficiaries.
If you don't have a valid will, you're in a state of intestacy. In other words, you're dead, and there is no will. Having no will virtually guarantees a lengthy and costly probate process.
Even with a will, probate may still take a few months. In some cases, there will be legal wrangling for up to a year. That costs a lot of money.
Additional financial costs of probate include:
All in all, probate can cost up to 10% of your total estate.
Here is an illustration for probate’s potential costs. Suppose your estate is worth $400,000. In some cases, probate can cost as much as 10% of $400,000.
That's $40,000 that doesn't go to paying your kid's college tuition. Or money not there for your wife's life-saving surgery.
Probate is expensive, but there is a safe and legal way for you to avoid it altogether.
A guaranteed way to beat the cost of probate is with a living trust. A living trust enables your family to skip the probate process. When you use a will, your estate becomes probated. In a living trust, there is a probate process.
That means your estate passes promptly to your beneficiaries. All you have to do is create a trust document. Then, you transfer ownership of your estate to the trust and name a trustee. Typically, you'll name yourself the trustee to control the trust's estate.
A nice benefit of a living trust is that it gives you operational anonymity. For a real estate investor, anonymity is critical because it can help avoid being sued.
The other benefit of a living trust is that your heirs don't have to wait to get the estate. Also, people with ill intentions will find it difficult to challenge a living trust in court.
One way you can add another layer of protection to a living trust is with a pour-over will. A pour-over will stipulates any property not put into the living trust is "poured" into the trust. Then, the trust divides and distributes the property among your beneficiaries.
All in all, probate can be an expensive process, but a living trust eliminates that cost. You are the ultimate decision maker with how you distribute your estate. Not the attorneys. Not the courts. It's impossible to overstate the value of the peace of mind that comes with a living trust.
If you don't have an estate plan, it might be time to get one now. The cost of probate can be substantial, especially for real estate investors. Lucky for you, it's easy to avoid probate. Our favorite option is setting up a living trust.
A living trust makes it easier for you to pass on your wealth to your family. It also provides a layer of protection by giving operational anonymity. In our litigious society, that is a huge advantage.
Are you ready to speak with an expert? Learn about our comprehensive solutions you can use to achieve financial freedom, reclaim your time, protect your assets, and build your legacy. Book a FREE discovery call now.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
Ready to know more than your attorney? Join our community platform where you'll get immediate FREE access to all our best educational resources for real estate investors. Including 8 Masterclasses, group mentoring replays, and much, much more.
Join thousands of real estate investors in all 50 states as they enjoy exclusive content, special promotions, and behind-the-scenes access to me and my guests. No spam, ever. Just great stuff!