Most of Us Should Fear Death and Probate, not Death and Taxes 

Most of Us Should Fear Death and Probate,  not Death and Taxes 

By Attorney Paul Hanks Ironclad Living Trusts

The death of a loved one floods us with feelings of grief, loss and sadness. As those left behind grapple with this human loss, the absolute last thing that is needed is the dagger of probate.

Probate is a trap for the unwary which quickly ensnares one’s estate upon death even where an uncontested will is involved. Probate plunges the estate into a painstakingly slow and costly probate process. While this process is foreign and confusing to a layperson, it is a boon to the pockets of lawyers. 

There is a misnomer that the government stands in the loot line as well, ready to pillage the decedent’s estate by way of what is commonly known as the death tax. In truth and fact, it’s not death and taxes most of us should be worrying about but death and probate. In large part this is due to a very friendly and favorable federal exemption which shields most estates from taxation.

Historically the federal exemption was not friendly at all and estate planning attorneys had to resort to complicated trusts designed to shelter an estate from the sting of the death tax. Indeed, the federal exemption was as low as $675,000 in 2001, and upon one’s death the taxman would cometh like the hovering presence of the grim reaper and carve out a deep 37% tax on every dollar of the decedent’s estate over the exempt amount. 

The result was so harsh and unfair that former President George Bush orchestrated the passage of a massive tax reform relief package in 2001 which dramatically raised the federal exemption over time. Under the Bush administration the exemption rose up to two million dollars per individual. During the tenure of President Barrack Obama the federal exemption continue to rise. By the time Obama left office in 2016 the amount shielded from the death tax had rose to $5,450,000 for each person. For married couples the combined exemption exceeded ten million dollars.

President Donald Trump then took office and the Tax Cuts & Jobs Act of 2017 became law. This Act doubled the federal exemption to over ten million dollars per individual. Presently the federal exemption stands at $13,990,000 per individual. 

This freedom from the estate tax is fantastic news for your estate beneficiaries. And even better news is that California remains in line with the federal exemption.

While taxpayers have enjoyed a huge sigh of relief, it is still foolhardy to relax. Although freedom from taxation is a great thing, the dagger of probate still awaits those who do not undertake proper estate planning. Unless the value of one’s estate qualifies as a small estate with the value of all countable assets not exceeding $184.500, the estate is thrust into the nightmare that is probate.

As an estate planning attorney, my law firm can make tens of thousands of dollars probating an estate through the court system, while the mere cost of a comprehensive living trust package averages less than $2,000. It is a very small price to pay in order to avoid probate and allow those you leave behind to seamlessly tend to the affairs of your estate outside of court with the lawyers left on the sideline. 

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