If you have immediate family members whom you love, it is assumed you will leave most of your estate to them. In this case, leaving a few hundred dollars to a distant niece or friend is rightly viewed as an unnecessary sign of respect and kindness. But beware: The amount of time, legal fees and other costs associated with giving a $1,000 bequest in your Will can cost as much as leaving a $50,000 to that beneficiary. In fact, leaving small gifts to people using your Will is a sure way to increase your legal fees in New York, oftentimes incurring more expenses to send the gift than the amount of the gift itself:
- Cost of Mailing Notice (Required): You have to mail notice of Probate to every beneficiary named in a Will. True, the actual cost of a postage stamp is not large, but the time to create the mailing will definitely be billed by the retained law firm. The firm must also create an Affidavit or Affirmation it was mailed and file it with the Court.
- Cost of Finding the Person: If you know how to contact the beneficiary this cost is mitigated, but if the family is not friendly with them and no contact information is provided in the Will (and it usually is not) this will create an unnecessary time delay and cost of finding the address of the beneficiary.
- Beneficiary Inquiries: Remember that the estate you are administering to is always “on the clock”, meaning any phone call made to your attorney is probably being billed. Even only 2 or 3 quick phone calls from a small beneficiary adds up. No bueno.
- Tax Preparation: If an estate generates income and distributes it to beneficiaries the estate may need to generate “K-1s” and send them to the beneficiaries. While this election may be optional, it does add to accounting fees.
- Releases (Required): Before a beneficiary can receive funds they are supposed to “release” the Executor, effectively saying that the beneficiary has been paid and won’t sue the Executor. Creating a release, sending it to a beneficiary, following up when it isn’t received, and confirming upon receipt that it was properly signed takes time, and in itself is often more expensive than the gift.
- Another problem lies in leaving a small “percentage” gift (i.e. I leave 2% of my estate to my niece Bella). Remember that this 2% often includes not just monetary and real estate assets but personal things as well (photographs, furniture, paintings etc.). How exactly will this 2% be calculated from your personal items? If everyone is friendly – it will be easy. But what if everyone wants the same photograph of the same grandfather? This 2% may end up costing the estate thousands in legal fees as family members argue!
Do not leave small bequests in your Will. It is often better to leave the grand total of these bequests in a Transfer On Death or In Trust For account naming the beneficiaries as successor owners of the account. This way the cost and time does not accrue to a law firm or accounting firm. Otherwise, your lawyer and accountant may end up being the true beneficiary of your small bequests.
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