Estate Planning Lawyer in Clinton Township
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Your Family Will Not Lose Half of Your Estate to Taxes or Probate

We try to get a feel for the client’s real objectives in setting up a plan at the initial Estate Planning meeting. This allows us to create a plan that is customized to meet the specific needs and concerns of that client. When faced with the question “what do you want to accomplish with your plan?” many clients respond that their primary objective is avoid “giving half of their stuff to the government”. While this is a very commonly cited goal of Estate Planning, it is not a realistic concern for the vast majority of clients.

The public seems to hold two common false beliefs which lead to the perception that there is a risk of the government taking half of a person’s assets at death:

  1. The Estate Tax will cost my family up to 50% of my assets when I die.

  1. Probate expenses will eat up 50% of my assets when I die.

Estate Tax Reality

At Penzien & McBride, PLLC we utilize a variety of sophisticated techniques to help minimize or eliminate Estate Taxes for our clients. But the fact is very few people in this country have a realistic concern about Estate Taxes.

As a general rule (without getting into non-citizen residents or other situations which do not apply to the vast majority of people who reside in the United States) every person has an Estate Tax exemption of $5.49 million (as of 2017). A married couple can share their exemptions with each other. This makes the exemption for a married couple $10.98 million. This means that the first $5.49 million ($10.98 million if married) of a decedent’s net worth is sheltered from Estate Taxes. This is with little or no planning whatsoever. This eliminates all Estate Tax liability for an estimated 99.8% of Americans.

The Estate Tax rate is generally 40% for those who have a tax liability. This rate applies only to the portion of the estate which exceeds $5.49 million. For example, an estate with a taxable value of $7 million would pay roughly 40% on $1.51 million ($7 million – $5.49 million exemption = $1.51 million). 40% of $1.51 million comes to approximately $600,000, or 8.5% of the $7 million estate value…a far cry from half.

Probate Reality

Probate has become the Boogie Man of Estate Planning. Everyone wants to avoid Probate but most people do not know why they want to avoid it. As with Estate Taxes, the most commonly cited reason we hear for avoiding Probate is a fear that “the government” is going to take 50% of the assets. Also, as with the Estate Tax, this fear is not really grounded in reality.

Probate avoidance is a legitimate goal of a proper Estate Plan. Probate is slow and it is in the public record. However, the risk of losing 50% of the estate assets is not very realistic. If this does happen, it is even less likely that it was lost to the government, and much more likely that it was lost to legal fees from feuding family members.

A properly administrated Probate Estate will typically cost between $1,000 and $5,000 in legal fees. This assumes there is no litigation between feuding family members. There is a filing fee of roughly $200 paid the Probate Court to open the Estate. A publication fee associated with publishing a required notice to creditors is required, which is under $100. There is also an Inventory Fee payable to the Probate Court which is based on the value of the assets being Probated. This Inventory Fee ranges from 1/3 of 1% to 1% of the total Probate value. Again, this is a far cry from half.

Expectations

At Penzien & McBride, PLLC, we feel most adults should have an Estate Plan in place. The drivers of the decisions to be made during the Estate Planning process should not, however, be based on fears and misconceptions. We attempt to educate our clients about the realities of Probate and taxes. We then customize a plan that most efficiently addresses real world concerns for each client. These customized plans may involve trust planning, but it may involve other less expensive means by which to ensure an orderly administration of the client’s assets upon death.

If you are looking for a practical and knowledgeable professional that can help you through the estate planning process or if you would like additional information about our Macomb County based estate planning services give us a call at (586) 690-4400 or complete our “contact us” form.

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