Probate can be long, costly, and tiresome for your loved ones. You may be thinking, does it really matter how hard it is to settle my estate? Yes, it does. It may not seem important now, but by taking the time to keep your beneficiaries up to date as needed can save your family a great deal of time, money, and stress.
Before we examine the hypothetical situation below, it’s important to know that any account with a valid living beneficiary will receive an account’s proceeds outside of probate. Naming a beneficiary gets your loved one access to your account more quickly and easily. Any asset that names a beneficiary avoids probate, and therefore, would not be subjected to probate fees, estate legal services, and other costly professional services.
For example, in Florida, depending on the amount of assets in an estate, an attorney can charge: $1,500 for $40,000 in assets, $2,250 for $40,000-$70,000 in assets, $3,000 for $70,000-$100,000 in assets and 3 percent of any assets over between $100,000 – $900,000. There are other percentages beyond $1 million, however, our example below examines an estate with assets valued at $500,000.
Example 1 – Person “A” fails to name any beneficiaries and/or fails to keep their beneficiaries current. Person A has an estate valued at $500,000, including: an IRA valued at $150,000, 401K valued at $200,000, life insurance policy at $160,000, and $40,000 in checking account (for this example, we exclude any potential homestead property). Based on the above-mentioned gross assets for Person A, a Florida attorney can charge your estate $15,000 for probate. This $15,000 generally only includes basic estate administration, and does not include the hourly fee some attorneys may charge for unique estate issues. Additionally, your estate may need other professionals, such as a CPA or tax accountant, and if dealing with homestead property: realtors, appraisers, surveyors, homeowners’ insurance, etc.
You didn’t work and save for the entirety of your life to have a large portion of your assets paying fees. You spent your life working and saving for your family and loved ones. Add and keep a current and valid beneficiary on any accounts/assets you are able to.
Here’s what Person A should have done:
Example 2 – Person A names a beneficiary for his/her IRA, 401K, and life insurance policy. The only sum of money subject to probate from Example 1 is the $40,000 checking account. That means, you potentially just saved your loved ones (and your estate) $13,500 in fees. As you’ll recall from above, any account that listed a beneficiary avoids probate. Therefore, you’re able to save on attorney fees because your estate’s probate value is no longer $500,000, it’s $40,000.
Protect your assets. Don’t stress about the future, put your mind at ease for your family and keep your beneficiaries up-to-date.