My First Seminar

I presented my first free, educational seminar this week. The topic was " How to Avoid Probate", and the attendance was a pleasant surprise to me. While the topic concerns death and touches upon disability and taxes, there is definitely a need for the kind of information that I presented.

First, what is your probate estate? In Massachusetts, your probate estate consists of assets that you own solely in your name when you die. Whether or not you leave a will, if you died owning assets in your name alone, the probate court is the venue required for legally changing title to those assets, getting them out of the name of the deceased person, and into the names of his or her heirs or beneficiaries.

If you don't write a will, then the probate court is the great decider; the court decides for you, according to the laws of intestacy and distribution, who gets your stuff, so if you have not properly planned for the disposal of your assets, the probate court will do it for you.

If you left a will, the probate court will oversee the payment of your debts and the distribution of your assets according to your wishes. There are many ways to avoid the delay, cost, and time involved in a full probate proceeding, and my seminar discussed the tools and strategies that can be used to achieve a non-probate estate, and eliminate the need for a full probate proceeding.

However, there were several people in the audience who assumed that avoiding probate meant that you also avoided estate taxes.

I'm very sorry to tell you that this is not the case.

Your TAXABLE estate consists of all assets in which you had an ownership interest when you died. That means probate assets, and other assets including traditionally non-probate assets such as life insurance that you owned; 401k's and profit-sharing plans; Inter Vivos Trust assets, if any, and also annuities. This list is not exhaustive; for example, the estate tax may also include certain transfers of property made within 3 years prior to death, among other things. Basically, if you had an ownership interest in an asset, it could be a countable asset included in your taxable estate.

I'll stop here and spare you the details on what you can deduct in order to reduce your taxable estate, because I don't want anyone to fall asleep. Suffice it to say that there is an enormous difference between a probate estate and a taxable estate, that most people don't realize it, and that I think people might be planning their estates under the erroneous belief that avoiding probate = avoiding estate taxes.

Let me make this very clear: estate planning can include tax planning strategies and probate avoidance strategies, but involves much more sophisticated planning than the average Joe or Jane should attempt on their own. So hire me.