Estate Planning for Smaller Estates: How Small is too Small?
Estate Planning for Smaller Estates: How Small is too Small?
Generally speaking, anyone who needs to ask this question likely needs estate planning advice. It may seem counter-intuitive, but the cost of administering a smaller probate estate may actually be greater than the cost of a larger probate estate relative to their respective sizes.
First we must address what actually qualifies as a “smaller estate”. Many people who would not consider themselves rich by any stretch of the imagination are actually paper millionaires. Own a house with substantial equity? In Miami-Dade County, a standard single-family ranch style house from the 70's in a nice but quite ordinary neighborhood might be worth $900,000. Add to that any significant savings, pensions, IRAs and other investment vehicles and a typical middle-aged, middle management person might actually be worth upwards of $1M once all is considered.
Florida provides a statutory guideline for probate fees, but the percentage presumed reasonable by the statutory guidelines actually declines as the estate grows larger. Consequently, while the marginal legal fee for administering a $1M estate might be 3% of the estate’s value, the marginal fee for administering an estate in excess $10M could actually be only 1%. Further, these are only guidelines, not requirements. Probate attorneys are free to charge what they will, subject only to Florida Bar rules and court approval.
Moreover, probate might be costlier, might be longer, might be more involved but it is always and certainly public. The will and all administration documents are by definition public documents and therefore open to inspection by any member of the public – anyone at all.
To a large extent, these costs can be substantially reduced through planning and the selection of the correct trust vehicles intended to avoid, or at least minimize probate. Further, a properly drafted estate plan may very well result in the complete avoidance of any probate at all and will therefore be discrete and private. Essentially, trust administration can be a wholly private matter handled between family and without airing family business in a public forum.
In closing, many people who may not think so would significantly benefit from a well-planned estate that includes provisions for trusts and their administration. Whether for costs, efficiency or privacy, the benefits are usually significant.
For further inquiry, please feel free to contact me at the email or telephone listed below.
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