Bell explains estate planning at WyFB Legislative meeting
Cheyenne – “Just about everyone should have a will,” said Jason Bell, financial advisor for Mountain West Farm Bureau. “However, a will does not take an estate out of probate. It just makes sure after it has gone through the probate process, property gets to the person that it was intended for.”
Probate is the legal process that takes place after a death providing for distribution of property and assets and payment of debts and taxes.
The state of Wyoming is happy to provide anyone with a will, Bell explained, and will give residents a will if they die without one. This process is called intestacy.
Under probate in Wyoming, a married couple with kids divides an estate in half, with the living spouse receiving 50 percent of the shared assets and the children sharing the other half of the assets.
“A lot of people try to get out of probate, and one way that has been common through the years is by adding names to deeds,” explained Bell. “This is one way to get out of probate because the deed is then passed to the next person on the deed.”
“We don’t really pre
fer that because things have changed in the state of Wyoming,” described Bell. “Jointly held property is fully subject to creditors of both parties and could expose them to liability.”
The legislature created beneficiary deeds to help solve this problem. By having a beneficiary deed, the estate avoids probate and no new names are added to the deed.
Adding a beneficiary deed to an estate also allows creditor protection for an inheritor.
Bell noted that bank accounts are another asset that may have multiple names associated. To help alleviate this problem, Bell suggests adding transfer-on-death (TOD) or payable-on-death (POD) documents to bank accounts.
Multiple beneficiaries can also be added to these accounts without having to deal with liability issues.
Problems with probate
“There are three things people don’t like about probate – high cost, the nine-month waiting period and privacy concerns,” explained Bell.
Wyoming Statute says when a property owner dies and their estate is worth more than $200,000, it will go through probate regardless. An attorney must be hired, and they will receive roughly two percent of the estate.
The personal representative of the estate also receives two percent.
The fee, however, to the attorney and personal representative are income taxable.
“If an individual has less than $200,000 in assets, though, in the state of Wyoming, a small estate affidavit can be filed and full-blown probate can be avoided,” advised Bell.
A beneficiary deed can also be filed to avoid probate for individuals that have assets totaling under $200,000.
Wyoming Statute also states that at least nine months are required to settle a probate case, and creditors also must be given an opportunity to lay a claim on an estate when the owner dies.
“That usually means someone of the estate has to place two ads in a newspaper,” said Bell.
The state of Wyoming is a great creditor protection state.
“Wyoming is trying really hard to be the number one in the country. There is a lot of creditor protection for those living in Wyoming, and it makes it very hard for creditors to attack certain types of assets,” stated Bell.
Creditors can be bill collectors or even an ex-spouse explained Bell.
Another way to protect against creditors is to have a trust.
“Generally speaking, a lot of people who have some level of assets prefer to get out of probate,” said Bell. “They can do this by using beneficiary deeds or a revocable trust.”
A separate tax return does not need to be filed with a trust, and the taxpayer’s identification number for the trust is usually an individual’s social security number.
“If a child does not like the trust for any reason they can write themselves a check the next day and be out of it,” said Bell. “As soon as they do that, they are going to lose that creditor protection.”
“A will tells people who gets what when a person dies,” described Bell. “A trust has disability provisions in addition to saying what happens when a person dies.”
The trust can also designate an individual’s trustee when they are disabled.
Making the decision
When deciding if a will or trust would be better for an estate, Bell recommended that producers calculate which one will be cheaper and better for the estate.
With a will, roughly two percent of the estate will be spent for the attorney alone.
“A typical trust might cost $2,500 for a married couple,” said Bell.
When calculating the value of assets Bell mentions that anything with a beneficiary will not go through probate, including items like life insurance policies, annuities and IRA accounts.
“People have to think about what goes through probate,” stated Bell. “One of the biggest items that go through probate is land.”
Special considerations for trusts
Special considerations that need to be contemplated when devising a trust are taking care of minor children, ancillary documents and any special requests a person may want to include in their trust.
“There aren’t going to be any rules that tell individuals how they should do something by a certain time,” stated Jason Bell, financial advisor for Mountain West Farm Bureau. “There are a few rules in Wyoming regarding a spouse, but outside of that, an individual can build their trust however they want it.”
Bell advised that it is important to think about any special need situations for an estate. For instance, longer periods of time a child may need a trustee or an age limit on when a child can access the money in the trust should be considered.
“People also need to identify the trustee of the money for their kids,” advised Bell, “or the court will appoint someone, and that may or may not be the person an individual wants.”
Ancillary documents are also very important to include, stated Bell, and they are what he calls ‘what if I don’t die’ documents.
“If an individual doesn’t die but is in a coma, they need to make sure that they identify who is going to make their medical decisions for them,” said Bell. “Also, those developing trusts need to make sure people can access funds if that person wants them to.”