I recently spoke to a group of our bank customers and there were several people in attendance who did not realize a will must go though the probate process. The truth is, all wills must be verified by the probate court to be enforceable. Having a will keeps the courts from deciding to whom your assets and farm property go, but it still needs to go through this time-consuming, costly and public procedure.
Every person, at a minimum, should have a will. Drafting a will is crucial because the state has a ready-made alternative will for everyone who dies without one. However, the estate distribution according to the state is likely to not be suitable for many people. You worked hard to accumulate your assets and you should decide how and when they are distributed.
A will does not avoid the probate process. Through the probate process, a will is submitted to the court for administration. The court oversees your estate, payment of your outstanding obligations and distribution of your assets according to the terms of your will. Further, since your will is submitted to the court, it becomes a public record for the entire world to see, which is problematic for those who desire a sense of privacy over their financial affairs. It is to everyone’s benefit to avoid probate. Whether you do this by titling your assets in a certain manner or creating a trust is a personal decision that should be made in conjunction with your estate planning attorney.
In some situations titling your assets with a POD (Payable on Death) designation or TOD (Transfer on Death) designation may be appropriate and will result in avoiding probate. However, this technique still doesn’t help with estate tax planning and the timing of distributions to beneficiaries.
The most common estate planning instruments are wills and living trusts. There is a common misconception about the need to have a living trust. Many assume that they only need a simple will to best take care of their affairs when they pass away, and that only the wealthy need to have a trust. While this may be true in some instances, it often also leads to unexpected results.
Jami Peebles is with Central Trust & Investment Company affiliated with Empire Bank and Ozark Mountain Bank.
