THE ENEMY’S NOT AT THE GATE, HE’S ON THE COUCH

People almost universally believe that when they die their estates will be subject to stringent government oversight and high taxes. They can’t specify what taxes or what government oversight to which their estates will be subject. They aren’t quite sure of how to avoid these horrors – though they often believe that a living trust is the solution. And they come to see me to draft estate planning documents that will “make things easy for their children.” They don’t want to be a burden to their children after they die.

This fear drives people to me, so what I’m going to say might be troublesome for my practice: Estate administration, or what most people think of as “probate,” isn’t burdensome at all, in most cases, and the vast majority of estates do not pay any form of estate tax, though recent changes in the State’s estate tax has changed that fact somewhat.

The biggest burden in estate administration is dealing with the loved one’s death. After that, it gets much easier.

Most estates do not pay estate tax because most people have estates that are valued at less than $675,000, and they leave their entire estate to their spouse or children. For instance, if a person passes away owning $500,000 of assets, which includes the value of their house and the death benefit of their life insurance policies, and they leave their entire estate to their three adult children – their estate will not pay any estate or inheritance tax.

If the children all get along, or get along well-enough to not be at each other’s throats, the executor of the estate will simply sell the house, liquidate the other assets (such as CDs and stock), and distribute the proceeds to himself and his siblings. Cleaning-out and selling the home will cause some stress – it always does, whether it’s your house or a deceased parent’s – but other than that, there’s not much to the administration of an estate such as this.

If tax returns do have to be filed – for instances, the value of the estate is greater than $675,000 or a portion of the estate was left to a non-lineal descendent, such as a brother or charity – then the executor would want to hire a lawyer to help him prepare the appropriate tax returns. The fee would probably be quite minimal and would be well-worth the cost in terms of burden-shifting.

After the lawyer prepares the tax returns, he’ll go over them with his client, the executor, and file the returns for the estate. Nothing to it.

Now, this is a very rosy picture of estate administration, and problems can, and often do, occur. Most problems, I find, arise out of poor familial relationships. Some family member or other, named beneficiary under the Will, such as friend, doesn’t get along with or trust someone else. The disgruntled beneficiary questions everything that the executor does and refuses to comply with reasonable requests.

For instance, a child might have lived with the parent who died. The executor might be another child. The executor might want to list the house for sale, but the child who lived with the parent might refuse to sell the house by refusing prospective purchasers access to view the house. The children might fight over the listing price for the house. Some might want to set a low price for a quick sale; others, maybe the one that lives there, might want to set a high price.

This type of family in-fighting can cause significant problems for estate administration. And the sad part is, there isn’t much that a lawyer can do to avoid this sort of problem. Whether you have a trust or a Will, you might have this type of fighting.

One thing is for certain, however, not having a Will at all provides fertile ground for family in-fighting. While you cannot avoid all problems on your passing, you can avoid many by simply having a plan.

Most estates will not be subject to high taxes or burdensome government oversight. The truth is, the greatest problems in estate administration come from within, not without. The problems come from the family members who are the beneficiaries, not the government.

The solution to this problem is the same as what most people think of as the solution to government oversight and taxes – having a well-drafted estate plan. So, you see, telling the truth gets us back to where we started, with people coming to see me to craft an estate plan for them.