Gen X and Millennials: Have You Talked to Your Parents About Estate Planning?

In our line of work, there are two main reasons why people come to an attorney for an estate plan. One is to choose guardians for minor children in the event that both parents pass away. That’s a great reason and is incredibly important. But what if you don’t have little ones running around? The other reason people usually want an estate plan is to preserve all the “stuff” (read: houses, bank accounts, family heirlooms, business interests, etc.) from falling into the wrong hands (the state, the IRS, creditors, estranged family members). The second reason, in its own way, is good too, but it doesn’t tell the whole story.

Start from the Beginning: What Happens to the Stuff When People Pass?

When a person passes away without a plan in place, the state (in our case, Maryland intestacy law) decides what happens with all of the stuff left behind. There is a specific process, called probate, that includes gathering all of the person’s assets (real estate, bank accounts, business interests, personal effects), determining the total value, satisfying any outstanding debts, and then distributing whatever is left to the deceased person’s family. The process is long, public, and expensive. Not to mention, if the stuff really should be passing to someone other than the nuclear family (as defined in the state’s default laws), it may never make it there. So, what do people do to avoid this situation? They write a Will.

Even with a Will, Everything Has to Pass Through Probate 

You’ve heard of people writing a Last Will and Testament to ensure that their stuff goes to the right family members or friends when they die. The Will is also where people can make that important guardianship choice regarding who should step in to care for young children, if that situation arises. All in all, a Will is an incredibly important document. But, there are a few things you may not know about a Will.

Although Wills are able to be much more specific about your intentions than the Maryland default laws, they don’t actually avoid probate. Even with a Will, everything has to pass through the probate process, which is still time-consuming, part of the public record, and — most of all — expensive. In the State of Maryland, the whole probate process can end up costing between 3-6% of the total value of the estate, and that’s without any lengthy court battles about who gets what!

Be Honest, Who Really Benefits from a Well-Planned Estate?

A lot of attorneys out there are putting the guilt trip on Baby Boomers, reminding them that, if they don’t put an estate plan in place soon, their loved ones will be out of luck in the future. The standard narrative is this: 1) Get an estate plan. 2) Feel peace of mind knowing your loved ones are cared for. Of course, that sounds great, and a good number of people do end up getting their affairs in order just to feel like they’ve checked the box. BUT, very often, the promise of peace of mind isn’t persuasive enough to get people into the attorney’s office. That’s why over 60% of Americans don’t even have so much as a Will, let alone a probate avoidance estate plan.

Here’s the thing, Gen-Xers and Millennials, you, not your parents, are the ones who will benefit most from your parents’ estate plan. And you are also the ones with the most to lose. Not only is there the possibility that a lengthy probate process could tie up assets for twelve to eighteen months and end up costing between 3-6% of the total value of your inheritance, but there is also a lot of stress and work that comes along with the probate process. If your parents don’t leave detailed instructions about their wishes behind, you may be stuck trying to figure out what they would have wanted and navigating arguments with family members and friends who do not agree. If you don’t live near your parents, that also means days off of work and hours spent traveling to and from probate court and the attorney’s office. In short, it can be a hefty burden.

Surprise! Estate Planning is Actually in Your Best Interest

Take it from us — probate is not a whole lot of fun. But, there is a way to avoid it. A probate avoidance trust is a relatively simple set of legal documents that keeps your parents assets out of probate. This kind of trust, alongside a standard Will, is a secure way to ensure that things move more quickly, affordably, and smoothly after your parents pass. You don’t want to be spending that time when you should be with loved ones mired in paperwork and bureaucracy. Sure, setting up a probate avoidance trust costs a little time and money now, but it’s nothing compared to what you will save in the long run. Talk to your parents. Maybe even offer to join them in the estate planning process. It will be an important investment in your future inheritance and peace of mind.

Want to learn more about setting up a probate avoidance trust to protect your inheritance? Give The Tyra Law Firm a call at (301) 315-0811.

Written by Neil Tyra