Save money with a Last Will and Testament
A Last Will and Testament is a love letter to your family. It gives instructions for your wishes and can prevent unnecessary expenses for your heirs. If you have ever thought of getting a Will, you know some of the reasons to get a Will. Saving money for your heirs may not be something that crossed your mind. As a probate attorney, I have first-hand experience with the unnecessary expenses that heirs pay when there isn’t a Will. I have also learned that the administration of an estate without a Will is more expensive than with a Will.
A Last Will and Testament waives the requirement of bond
In Iowa, the person who administers the estate under court supervision (probate) is required to post a bond unless bond is waived in the Will. Bond in probate is like an insurance policy on the administrator in the event they mishandle the assets of the estate. The bond is calculated on the value of the estate. The premium owed for the bond is often $500 for every $100,000 of the estate. Under this calculation, a $300,000 estate is a $1,500 bond premium payment. The bond is paid using the estate assets which means less money for the heirs. The cost of a Last Will and Testament from an experienced attorney will often be less than the cost paid from estate assets for a bond premium. If a Will is more expensive, it is likely the value of the estate is higher (think $1,000,000) therefore the cost of the Will is still less than paying the bond premium per $100,000.
If saving money by waiving bond in the Will isn’t motivating, then I have another reason. In Iowa, if there is not a Will, the court will only waive bond if there is a waiver filed by each heir. This an option under Iowa Code 633.173. That process requires an attorney to contact the heirs and have them sign and return the waiver. A waiver of bond is very confusing for heirs and can result in difficult conversations with the administrator and distrust with the attorney.
The waiver of bond also delays the opening of the estate. Iowa law requires an estate to be open for four months from the second date of the legal notice in the newspaper. The estate can’t open until bond is paid or waived and the publication can’t happen until the estate is open. If a wavier of bond is the goal, I estimate a 2-3 week delay in opening the estate. Getting back to money, if the estate is paying the attorney an hourly rate, the time to draft and file the waivers of bond is at least an hour. The attorney must send, collect and file the waiver of bond and apply to the court for bond to be waived.
A Last Will and Testament waives court approval for the sale of real estate
Often times, court-supervised probate is required because there is real estate that was owned by the decedent. In Iowa, probate is required to transfer or sell real estate if there is not a surviving joint tenant. Probate is also required in Iowa if the decedent owned real estate as a tenant in common. A tenant in common ownership indicates the percent ownership of each deed holder and the decedent’s percent ownership transfers through their Last Will and Testament. A side note, if the decedent’s real estate ownership is held in a revocable trust, then probate isn’t required. I go into more details in my blog “8 Reasons to Set Up a Revocable Trust”.
A Last Will and Testament can waive court approval for the sale of real estate. If you are paying the attorney an hourly rate, the waiver of court approval saves money on attorney fees. Similar to the waiver of bond, the administrator can get each heir to sign a consent to the sale of real estate and waive their right to a hearing. The attorney must send, collect and file the consent to the sale and apply to the court for the hearing to be waived. This is usually 1.5 hours of time for an attorney. Even if you aren’t paying the attorney an hourly rate, the sale of real estate is covered under extraordinary fees of an estate which means the attorney is able to ask the court for more than the statutory two percent (2%) fee of the estate. This is outline in Iowa Code Section 633.199.
A Last Will and Testament appoints an Executor
The Executor of a Will is appointed by the decedent to distribute the assets controlled by the Will to the heirs named in the Will. If there isn’t a Will, there isn’t an Executor, but this doesn’t exclude the need for probate. As stated above, if the decedent owned real estate at death that didn’t have a surviving joint tenant or was owned as tenants in common, then probate is required to transfer or sell the real estate. If there isn’t a Last Will and Testament, Iowa law directs the administration of the estate in a process called intestate. Iowa Code Section 633.227 allows a qualified person to be appointed as administrator. A qualified person includes creditors of the decedent. If there is more than one person who wants to oversee and administer the estate, then a hearing is held and the judge decides. I have an estate in probate right now that was opened by a creditor because the decedent owned a home. It has gotten incredibly expensive and time consuming for the estate and the heirs.
One more thing
I recommend using an experienced attorney to prepare your Will. It is tempting to do it yourself because of the anonymity and low cost, but I strongly encourage the use of an experienced attorney. I go into more details in my blog “Can I write my own Will?”. Seven years ago I created Will in a Day® to make the process of using an attorney to get a Will simple and stress-free. For a flat fee, you can have a completed and signed Will in 90 minutes. Learn more here. If you feel embarrassed about not having a Will or overwhelmed about your first experience with an attorney, read the Google Reviews for assurances. Google “Hope Wood JD”.
Use an experienced estate planning attorney
The reason I recommend using an attorney, and more specifically, an experienced attorney, is that only 50% of having a Will is about having a Will and the other 50% is the application of the Will in real life. If you ask an experienced attorney if they use forms for their Wills, they will say yes. This is why companies can make money on selling the form online. The experienced attorney, however, will modify their form specific to the client’s circumstances. If you are working with an attorney and ask them about different scenarios for your estate and they are unable to confidently answer a majority of your questions, consider interviewing a different attorney for your estate planning. Even with 9 years of experience in Wills, I refer clients to a more experienced attorney for certain circumstances.
One unexpected consequence I see when a person has a DIY Will is their gifts to a charity. A person has good intentions when leaving money to a charity in their Will. This gets back to my earlier point that 50% is about having a Will; without a Will, no money can go to charity from an estate unless it is a named beneficiary on an asset. Where the DIY falls short is the application of the gift to charity (the other 50% of having a Will). In a DIY situation, the person doesn’t know the real life application of a gift to charity in a Will. An experienced attorney can address the following questions. What asset will pay for the charitable gift? What if the gift to charity is more than the remainder gift to family members because of creditor claims against the estate? If the Will doesn’t go through probate because no assets are subject to court supervision to transfer, will someone pay the charity out of their own inheritance?
Wills and probate are my entire practice. Learn more and schedule an appointment at www.hopewoodjd.com.
