When left to our own devices, most people will choose to avoid courts and taxes. Two unpleasantries of life that cost us our time, money, and even family relationships when confusion over financial responsibility give rise to conflict over who shall pay a decedent's obligations or represent the family in court.
We've found that when people attempt to avoid probate courts and estate related taxes, they can be grouped into three categories: (1) people who hire an experienced estate planner and attorney to get it done right, (2) people who leave their children with a mess and don't plan at all, and (3) people who try to do it themselves with online resources but do more harm than good.
For the many parents out there who will fail to plan at all - their families will have to go through probate, but under current tax law they will more often than not, still enjoy capital gains tax avoidance. Other parents who choose to DIY their estate planning with forms they find online may succeed in having certain assets avoid probate, but will often cause other harm like unknowingly eliminating the tax exemption their heirs should have received on the appreciation of larger assets like homes and investment accounts.
Example: Assume that you are a widow(er) and purchased your home for $250,000 in the year 2000. In 2024 your home is now worth $500,000 but you have been recently diagnosed with cancer so you add your daughter's name to the title of your home using a quitclaim deed because a friend told you it would help avoid probate. In doing so, your daughter will now have to assume the same basis you have in the property ($250,000). The result is that when she sells your home for $500,000 shortly after your death, she may avoid probate but will need to pay a 20% capital gains tax on $250,000 of appreciation, or $50,000.
If you are interested in learning how you can help your family avoid probate courts AND unnecessary taxes, in addition to ensuring they will always be situated for the best outcome across a number of other situations and expensive planning mistakes, click the button below to request free information about working with estate planning lawyer Stuart Williams.
