I Want All My Property to Go into a Trust So That I Can Avoid Creditors

Misconception #7 of “The 12 Biggest Misconceptions of Estate Planning Clients”

The issue of creditor avoidance is very complicated, with federal law, state statutes, IRS rulings, and court rulings all weighing in about who gets what when there’s not enough to go around. Start reading the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, move on to your state’s statute of frauds, and then the Fraudulent Transfer Act, and you will be peeling only the first few layers of the onion.

You may think that this doesn’t concern you, since you don’t see yourself as a debtor. Maybe you’ve already paid off your mortgage, and you pay off your credit card balance every month, so you think you can stop reading. Not so fast. Read More >>

I Don’t Want the Government to Get My Property

Misconception #6 of “The 12 Biggest Misconceptions of Estate Planning Clients”

Some people fear this will happen if they die without a will. Others have heard rumors about death taxes, and they think this is the “guvmint’s” final money grab as you’re taking your last breath. The latter concern—estate taxation—actually affects only about 1% of us, which is the topic for another blog. The first scenario could affect any of us, however.

If you die without a will, you, the “decedent,” die “intestate.” Every state has intestacy laws. These laws provide for the final distribution of any assets that aren’t otherwise legally disposed of, say, by beneficiary designations or joint ownership rights. Read More >>

More About the Basics of Probate, Part 2

As in life, so in death . . .

Probate begins when someone turns in the last will and testament of a recently deceased person (the “decedent”) to the probate court. The court then investigates whether this is indeed the last will and testament, and appoints an executor (or a personal representative or an administrator) to administer the estate.

Administering the estate involves winding up the decedent’s personal affairs. The executor identifies and safeguards all the decedent’s property, pays off all valid creditor claims, fights off any illegitimate creditor claims, and sells or liquidates property, keeping accurate records every step of the way. When all creditor issues are resolved, only then do the beneficiaries get their share, according to the will’s provisions. Read More >>

A Moment to Ponder the Basics, Part 1

What is probate, anyway?

We’ll get back to the rest of the misconceptions of estate planning in a few weeks. First, we need to answer the question, “What is probate, anyway?” Here’s part 1 of the answer.

Probate is the legal process that transfers your property (your “estate”) to those entitled to it after you die. It’s a simple definition, but with many nuances. Let’s break down that definition. Read More >>

I Want to Avoid Probate at All Costs

Misconception #3 of “The 12 Biggest Misconceptions of Estate Planning Clients”

This one’s tricky. Some states do have onerous probate procedures that are costly, time-consuming, and require a lot of court involvement. If you live in one of these states, by all means, take whatever steps your attorney recommends to avoid it.

But if you live in a state that has adopted the Uniform Probate Code in one form or another (18 states at last count), the probate procedure can be relatively cheap, quick, and informal, with limited court involvement. Colorado, where I practice, is one of those states. Read More >>