Nothing is certain, they say, except death and taxes.
Yet many Americans know surprisingly little about the legal process that follows the death of a loved one.
A new report, The State of Probate in America, reveals that many Americans are poorly informed about the basic facts of probate. Based on a representative survey of 1,000 adults, the report found:
◾ More than half of Americans have no idea how much probate costs.
◾ Less than half of us understand that inheritance is not automatic.
◾ Only 2% of respondents know how long it takes to settle an estate.
The findings come from a study released this month by Trust & Will, a digital estate planning platform.
The report suggests that few Americans fully understand the time and expense involved in probate — or the need for it.
“I think one of the biggest misconceptions is that probate is not a big deal,” said Kelsey Simasko, an elder law attorney in Detroit.
That’s right. According to Trust & Will, an estate takes an average of 20 months. But only 2% of respondents seem to have understood this time frame.
“It’s not a matter of weeks, it’s a matter of months, guaranteed,” said Mitch Mitchell, legal counsel at Trust & Will. “It’s a full-time job when you get down to it.”
Americans have no idea how much an estate costs
More than half of those surveyed said they had no idea how much probate would cost, and only 4% thought it would cost more than $10,000.
According to Trust & Will, probate fees typically range from 3% to 7% of the estate value. For an estate worth $500,000, fees can range from $15,000 to $35,000.
“I’ve rarely seen people overestimate expenses,” said Jonathan Swanburg, a certified financial planner in Houston.
Overall, more than half of respondents admitted they did not fully understand the approval process. Yet 52% said they knew it would be difficult.
“They tend to be afraid of it because they’ve heard horror stories,” said Seth Mullikin, a certified financial planner in Charlotte, North Carolina.
Fear of probate could cause confusion amid major wealth transfer
This fear could sow confusion in the years to come.
As baby boomers enter retirement age and control nearly half of America’s wealth, researchers expect an unprecedented generational wealth transfer over the next 20 years. As much as $84 trillion could change hands.
Much of that money will go to millennials, born between 1981 and 1996. And many of them are unprepared.
In a companion report, Trust & Will found that one-third of millennials don’t know whether their parents have an estate plan. Other findings include:
◾ Only 58% of millennials have discussed estate planning with older loved ones.
◾ 62% of millennials have neither willpower nor self-confidence.
Estate planning experts cite two main reasons why we don’t know more about the probate process in general, and our own family’s estate plans in particular.
Many people do not experience the full scope of estate planning until the death of their last surviving parent. The death of the first parent in a married couple can be relatively straightforward, at least from a probate perspective.
“You’ll probably only go through this process once,” said Colin Day, a certified financial planner in St. Louis.
“It’s an uncomfortable conversation.”
Second, many adult children find it difficult to discuss death and inheritance with an aging parent.
“It’s an uncomfortable conversation,” Mitchell said.
But this is an important conversation. Inheritance laws vary by state and within states.
“We have 254 counties here in Texas,” Mitchell said. “There are at least 254 different ways to do probate because each judge can decide what form they want to put in.”
State laws also differ as to what happens if you die without a will. And this scenario is becoming more and more common.
According to the Center for Retirement Research at Boston College, the share of households over the age of 70 with a will or trust has been steadily declining. Between 2000 and 2020, the share fell from 73% to 64%.
In a will or trust, a person determines how to distribute their property and other assets after their death. When a person dies without a will, the courts take over.
But inheritance laws vary, and it can be difficult to predict who gets what.
If a New York resident dies intestate, leaving a spouse and biological children, the spouse inherits the first $50,000 of the estate plus half of the balance, and the remainder goes to the children, according to an analysis by Trust & Will.
In Florida, in the same scenario, the spouse gets everything.
Here are some expert tips for anyone who doesn’t understand how probate works or is afraid to discuss estate plans with their loved ones.
Write an estate plan
Retirement experts say most adults should have a will as part of a larger estate plan that dictates not only what happens to our assets after we die, but also who will manage our affairs in the event of an emergency while we’re alive.
Consider hiring a lawyer
Many experts recommend preparing an estate plan with the help of an attorney: estate plans are complicated and you don’t want to make mistakes.
Other experts say it’s entirely possible to write a will without a lawyer, especially if cost is an issue: Having a will, they say, is better than not having one.
According to the National Council on Aging, an online estate planning service can generate a will for about $160. The nonprofit offers an online guide.
Talk about your will
Many adult children cringe at the thought of approaching their parents to ask who will inherit what.
That’s why experts say aging parents should start the conversation themselves.
“It’s probably a lot more comfortable coming from the older generation,” said Harry Margolis, an estate planning and elder law attorney in Boston.
If you have multiple children with busy lives, Margolis advises, bring them together on Zoom.
Name the beneficiaries
Investment accounts and life insurance policies often require you to name beneficiaries, which are the loved ones who will receive the money when you die.
For many of us, beneficiary designations function like an estate plan: They are legally binding and dictate what happens to a large portion of your assets.
Designating beneficiaries now can greatly simplify the probate process later, or may help your loved ones avoid it altogether, experts say.
Where is the inheritance?Why Fewer Older Americans Are Writing Wills or Planning Their Estates
Prepare an estate planning file
When you die, you leave behind a tangle of utility bills, bank accounts, passwords and PINs for your loved ones to untangle.
Create a file, either on paper or on your computer, and start gathering this information now, from your Netflix password to the last known location of your key cache. Update the file as needed.
“I call it a treasure map,” Simasko said. “What you have, where it is.”