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A Tale of Two Estate Planning Stories


People like stories, and I have gathered a few in the years I have practiced law. During the time I have been representing people doing estate planning and handling estates, I have seen many things, both good and bad, that are examples of what to do and what not to do.  Most of the bad stories involve not doing enough, including not planning at all.

In this article, I recount the tale of two estate planning stories that actually come by way of a financial adviser who shared them with me. They are good book ends demonstrating the good and bad of estate planning. The one estate, which I will call the “Simple Estate”, involved only 5 stocks, individually held, by the decedent (the person who died) leaving only 2 children.  The other estate, which I will call the “Complex Estate”, involved 18 stocks and 5 children scattered around the country.

By naming these estates Simple and Complex, you might guess that the estate administration for the simple one was simple, and the estate administration for the complex one was complex, but you would be wrong. The decedent of the Simple Estate did a Will.  Most people who do estate planning only do a Will, so there is nothing unusual about that. I am fond of saying that a good philosophy to live by is “to keep things simple unless there is a reason to complicate them”. With estate planning, however, a little more complexity often makes things simpler in the end.

Doing just a Will is pretty simple.  Once the Will is signed, most people stop thinking about their estate planning until some life change causes them to consider it again.  Sometimes people do not rethink their estate planning at all when life changes occur and much time goes by.  In those instances, the failure to rethink the estate planning may add complication on top of complication, for what should have been a simple estate…, but I digress.

According to my financial adviser friend, the Simple Estate with the Will was still going on after 18 months of administration.  The 5 stocks represented 5 shares in 5 different companies (like Coca Cola, IBM, etc.). The Executor of the Estate had to deal with each individual company, and each individual company had its own protocol that was different than the others.  The differences meant more work for the Executor to liquidate the stocks, but this is not the primary reason for the complications.

The Estate had to go through the Probate process. Contrary to some popular opinion, a Will does not avoid the probate process; rather, a Will directs the probate process. It is better to have a Will than no Will because a Will allows you to control the process, but there is a better way.

Even with the simplest of probate estates that are straightforward, with no creditor issues, family issues, or other complications, the process takes 10 to 12 months (at least in Illinois).  A main reason that the process takes so long is the mandatory 6-month claims period that is required after the probate estate is opened and all the required notices are mailed and published.

It may take a month or more for the executor to work with an attorney to get the probate estate ready to be filed. After the petition to open the probate estate is filed, it may take two or more weeks before the Letters Testamentary (the document authorizing the executor) are received. Several more weeks may pass before the mailing notices to all of the heirs, legatees and creditors are sent and for notice to be published in a local newspaper. The notice, itself, must be published once a week for three successive weeks. And, only then, the 6-month claims begins to run.

On the front end, therefore, the probate estate can take two or three months to gather information, file the petition and get all the notices mailed and published before the 6-moth claims period even starts. On the back end, the preparation of the final documentation (inventory, accounting, receipts on distribution, notices, fee petitions and so on) and then, making all the distributions may take another two or three months before the estate can be closed. An executor who is efficient and diligent working with a responsive attorney can complete the process in about eight months, but most estates take longer than that.

You now know why the Simple Estate Plan takes longer to implement – because of the probate process. It is also more expensive because of the attorney fees, court costs and administrative costs that go with it.

For all of the reasons the Simple Estate Plan is more difficult and expensive to handle, the Complex Estate Plan is simpler, more efficient and less expensive to handle.  In the financial planner’s story, the Complex Estate Planning was a breeze. The financial planner told me the difference in time from when he was first contacted to when the stock was distributed was 18+ months (Simple Estate Plan) compared to just 7 days (Complex Estate Plan)!

The reasons are simple. For one thing, the stock in the 18 different companies was held by one administrator (in this case Edward Jones), rather than directly with each of the 18 companies.  Getting the stock transferred was simple because it involved contacting only one person – the financial planner – who did all the work.

But, the primary reason why the process went so quickly was because the assets in the complex Estate Plan were held in a Trust (or Trusts). A Trust for both spouses (or two Trusts, one for each spouse) is more complicated to set up, and will cost a little more than just a Will; but an estate that is in trust (or trusts) will not go through the probate process. Therefore, time, administrative burdens and expenses of a probate proceeding are avoided by the Complex Estate Plan.

With a trust, the successor trustee simply steps into place when the initial trustee (the person who did the estate planning) dies.  The successor trustee carries on the instructions in the Trust without the need for filing any papers or petitions, without the need for attorneys or the court, without the need for any notices or waiting period and without delay.

Using a Trust as the primary vehicle of estate planning, of course, is a bit more involved at the front end.  Once the Trust is established, the assets of the Trustor (the person who establishes the Trust) must be transferred into the Trust.  This is not a difficult process, but it takes a little more work than simply doing a Will and walking away.  It is also a bit more costly, but the additional costs involved are not nearly as costly as the price that will be paid when an estate goes through the probate process. In fact, the Simple Estate Plan will cost in the neighborhood of five to ten times more than the Complex Estate Plan to administrate.

If you are thinking about your estate planning, or reassessing the estate planning that you have, consider the differences between a simple estate plan and a more complex estate plan, and the benefits that flow from something more than just a simple estate plan.  If you want to know more about the differences between Wills and Trusts for estate planning, you may find other articles at the Drendel & Jansons Estate Planning Blog.

Kevin G. Drendel
Drendel & Jansons Law Group
111 Flinn Street
Batavia, IL 60510
630-406-6179 fax
[email protected]