Establish asset protection when you don't need it

The down economy has significantly reduced the average American's discretionary income.  The effect is the consumer re-prioritizing where they spend their money.  Unfortunately, that has resulted in consumers sacrificing wiser, long-term beneficial expenditures in favor of short-term relief.  There are countless examples of this principle at work.  Choosing to forgo routine car maintenance will result in expensive repairs down the road.  Letting your expensive health insurance policy lapse to save money in the short term may result in incurring significant medical bills later.  Avoiding regular dental checkups can necessitate the suffering and cost of a root canal.

Another example of this is failing to draft and implement an asset protection plan before a claim against your assets arises.  When drafted and used correctly, the only real threat to assets inside of an asset protection trust are fraudulent transfer claims.  These are claims made by a creditor that assets were transferred to the trust to "hinder, delay, or defraud creditors."  Such claims will fail if the grantor can show that the transfers were made before a claim existed or the grantor had reason to know of a claim yet to arise.  That means that transfers to an asset protection trust need to be made while the waters are calm if the plan is to be completely effective.  this concept is sometimes referred to as 'seasoning' the trust.  The longer the time period between transfers to a trust and a claim against you, the more secure the trust assets will be.

If you think that one day such a claim might arise, then establish an asset protection plan now.  Funding an asset protection trust after events leading to litigation have already occurred will still provide you leverage in negotiations with  creditors.  However, you can't effectively transfer assets to a spendthrift trust unless the timing of those transfers is proper.  While avoiding the legal fees of creating an asset protection plan may boost your bank account a bit in the short term, if a judgment is found against you down the road, you'll be kicking yourself for not engaging in planning sooner.

The Cost of Probate

Of the many reasons you want to avoid probate, one of the biggest is the cost. I've written on avoiding probate in the past, but haven't addressed cost directly. Probate is the process by which the court oversees the distribution of your property to your heirs. Your heirs will have to visit the probate court if you have died without proper planning. There are several forms of probate in Nevada depending on the value of the estate. Most probates are of the summary (between $100K and $200K) and regular administration (greater than $200K) variety. Probate attorneys charge by the hour to work on these matters and their fees range from $250 to $400 per hour and above. From the initial petition to the final discharge, the process on average can take anywhere from 8 to 12 billable hours. That's if the process goes smoothly, however. If there's disputes among the family about the administrator, who is entitled to what, or any conflicts with creditors, then the time and expense will only grow.

In the end you're looking at a cost from about $2500 to $5000. Now of course, YOU are not looking at that cost, you're long gone. And that is the attitude I receive occasionally when it comes to engaging in the proper planning to avoid probate. The truth is, though, the cost of probate will come from the estate itself. Did you really leave behind cash, maybe putting aside a little bit extra your heirs, only to see it further depleted to pay a probate attorney? Additionally, you are leaving behind what is sure to be a headache to your heirs and preventing them from enjoying the assets you've left behind for at least a few months.

Probate can be avoided by planning your estate during your life. Moreover, estate planning will cost a fraction of what probate costs. In addition, planning your estate will not only avoid probate, but allow you to be prepared if you are ever incapacitated during your life, keep your estate private, and allow you to make post-death decisions regarding how your assets will be distributed.

I do both probate and estate planning and while I'm more than happy to be serve as your estate's probate attorney, I'd much rather see you for your will and trust.