It was announced today that Nelson Mandela’s estate is valued at $4.1 million, excluding royalties and potentially other sources, to be split among his family, members of his staff, schools he attended, and the African National Congress, the movement with which he was intimately involved for decades and which now rules post-apartheid South Africa.
How do we know that Mandela’s estate is worth $4.1 million or more, and how do we know who is entitled to what he left behind? Shouldn’t that be private information? Wouldn’t a man of his stature and wealth want it to be private information? It probably won’t be long before we know about Philip Seymour Hoffman’s estate depending on how seriously he took estate planning before his surprising and unfortunate passing at only 46 years old.
We would know these intimate details about one’s estate if Mandela or Seymour Hoffman did the only most basic of estate planning—leaving only a last will and nothing else, or leaving no will at all.
We can learn 7 tips from the fact that Nelson Mandela had what appears to be only a last will.
Dying without a will—and in fact dying only with a last will—puts your family through the same probate court process in either case.
This is a common myth: people believe, perhaps given the prevalence of fill-in-the-blank software and cheap websites, that a will is enough. There is a sense of false security by relying on a robotic process versus someone with whom you can engage and interact and truly seek advice from. In either case, will or no will, your family has to navigate the public, timely probate court process.
Probate takes an average 12-18 months, and longer in more complicated estates or when beneficiaries dispute over assets.
And unfortunately, beneficiary disputes have been known to happen and hold up the process even in the smallest of estates where only a few thousand dollars are at stake. This is, after all, a public process and all family members and potentially other interested parties are entitled to notice (even people specifically disinherited in a will), which prompts people to get involved and make a ruckus who might otherwise have gone about their day disrupting someone else’s plans.
Probate puts creditors on a pedestal while beneficiaries have to wait.
The person who passed away may have owed money to the bank, credit card companies, or a neighbor down the street. It won’t necessarily be known to the survivors who all are valid creditors with a claim against the estate. So, the court process automatically gives creditors time to make their claim. In Colorado creditors have a four-month period from the time notice is published to the time they are legally obligated to make, or forever lose, their claim. But while the family is waiting on creditors to show up, only a very little amount of the estate is available to cover the family’s and the children’s immediate financial needs, and many times the small amount available (the “statutory allowance”) simply isn’t enough to cover the costs of living, which means another family member or loved one has to front the cost while the creditors get the first bite at the apple.
Probate is a public process, hence why we know how much is in Nelson Mandela’s estate and who he left it to.
Probate is a court process and courts are public. Anyone can go down to any courthouse and look up any probate record and use that information however they prefer. This is why one can see Anna Nicole Smith’s will or James Gandolfini’s will for example. Whether or not you were a private person during life makes no difference as to whether people have access to your last will and other probate documents, such as an inventory of your assets and accounting of who gets what, after your passing.
The probate court leaves your children in charge at 18.
It’s also prime territory for the unscrupulous. When a minor inherits via a basic will, the probate court not only has to initially get title/ownership of the inherited assets transferred into her name (a six-month old or 17 year-old can indeed own property), but the probate court subsequently has to choose a “conservator” to manage the property until the minor becomes an adult legally at 18 years old. When that happens is on the public records. If you’re a predatory lender or a get-rich-quick schemer, would you rather target a vulnerable 18 year-old or a savvy 40 year-old?
Assets that go through probate could end up in the hands of someone you’ve never met before.
When you do no estate planning or only basic estate planning, there are little to no protections you can put in place for your children. Once they inherit through a will, or under the default state law if you don’t leave a will, every up-and-down in your child’s life can leave their inheritance exposed. If they go through a divorce, a soon-to-be ex-spouse potentially has a claim to half of the inheritance. If they have creditor issues or end up in a bankruptcy, the creditor can make a claim against the inheritance. And even they are as straight as an arrow, a car accident at the end of a long day at work can result in wiping out the whole inheritance if they are at fault and someone sues them for medical bills. In short, what you worked hard to earn and leave to your children could end up in the hands of someone you’ve never met before.
Probate costs a lot of money.
The national average cost of probate is 5% of the fair market value (i.e., not counting debt) of what you leave behind. The cost of probate skyrockets the younger your children are as a conservator has to potentially serve in a court-appointed role—with the associated fees they’re paid, plus court fees, attorney fees, and bond premiums—for a longer amount of time until the youngest child reaches 18. Doing an estate plan now where you lay out the clear plan for your family and how they can handle everything without involving the court system of course still costs money on the back end (the “administration”) but in almost all cases not nearly as much as 5% of the estate. The smaller amount spent on fees the more that is available for your loved ones.
The pitfalls of probate aren’t required, and your family will give tremendous thanks when you equip them to avoid the public court process and handle all estate details privately. If you want to have an estate planning “check in” or even talk about it for the first time, check out your options with Wills & Wellness – we’re parents and estate planning attorneys. For the first two people who read and mention this article, we’ve reserved space on our calendars this month for a complimentary Estate Planning Session (a $750 value) to spend up to two full hours with you as you gain an understanding of the estate planning process and how to avoid probate.
Call 720-266-8190 today and mention this article, or fill out the contact form below and we’ll get right back to you in a jiffy!