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Why should I avoid Probate?
The Probate Process
Most of what happens during probate is essentially clerical. In the vast majority of cases there’s no conflict, no contesting parties, none of the usual reasons for court proceedings. Probate rarely calls for legal research, drafting, or a lawyer’s adversarial skills.
The probate attorney, or the attorney’s secretary, fills in a small mountain of forms and keeps track of filing deadlines and other procedural technicalities. In some states, the attorney makes a few routine court appearances; in others, the whole procedure is handled by mail.
For their services, both the lawyer and your executor will be entitled to fees from your estate.
Executor fees: It’s common for the executor to waive the fee, especially if he or she inherits a substantial amount of your property.
Attorneys’ fees: In many states, probate fees are what a court approves as “reasonable.” In a few states, the fees are based on a percentage of the estate subject to probate. Either way, a probate attorney’s fees for a “routine” estate with a gross value of $400,000 (these days, this may be little more than a home, some savings and a car) can amount to $20,000 or more.
The passing of a loved one is a stressful and confusing time. Families are dealing with decisions they may make once or twice in their entire lifetime. Jones Elder Law frequently assists our clients in dealing with the stressful event of a death in the family. A major mistake that families often make is trying to complete too many tasks to quickly. By all means if your loved one passes, feel free to call us for guidance but understand that everything does not have to be done right away. For your guidance we have set out a potential list of tasks, which are necessary, and possible timelines.
Contact family and friends.
Contact funeral home.
Locate a copy of estate planning documents.
Contact Jones Elder Law.
Review the insurance policy of the individual.
If the deceased person was a veteran, call your local Veterans Association.
Within the first 3 months
Meet with Jones Elder Law.
File the will.
Open Probate Matters (If necessary)
Identify assets and accounts of the deceased.
Check safe deposit box or home safe.
Contact the Office of Social Security.
Review any employer benefits of deceased.
Cancel credit cards.
Cancel anything that is no longer necessary. ( Cell phone plans, gym membership etc.)
In the following months
Identify assets and accounts of the deceased.
Change title to assets. The underlying document will need to be examined.
Deal with distributions to beneficiaries. Again you will need to examine the underlying document.
Settle the estate.
Hire an accountant.
After the estate is settled
Update your estate plan.
Review beneficiary designations for your retirement accounts and life insurance policies.
Determine if your accounts have pay on death(POD) or transfer on death(TOD) designations
Review your own financial situation, such as short term and long term cash needs.
Review your situation regarding life insurance, medical insurance, and other types.
Reassess your investment portfolio to account for additional assets and other changes.
If you’ve been reading our blog regularly then you know that the 2010 estate tax repeal has caused no end of confusion and uncertainty; not only for those who have been dealing with probate and trust administration since the tax was first repealed, but also for those who are trying to think ahead and do the right thing for their spouses and children. Many people have come to the erroneous conclusion that they have no choice but to stand by and wait until the Washington politicians make up their minds about whether or not to restore the estate tax retroactively—but we’re here to tell you that you don’t have to wait to protect your assets and your family.
Forbes.com recently published an article entitled How to Protect Your Family From Estate Tax Uncertainty. This article suggests that there are a number of steps you can take right now to protect your heirs and your assets, even if you don’t know what changes lawmakers may enact tomorrow or 2 months from now. Their suggestions include everything from working with your estate planning attorney on contingency plans to account for anomalies such as no estate tax or minimum exemptions, to common sense action items such as taking the time now to track your cost basis for assets (to help your executor and heirs determine the change in value for tax purposes.) The Forbes article also suggests that some people may want to plan to save by giving—taking advantage of the gift tax exemption amounts.
There are always steps you can take to ensure that your estate plan is up to date, our firm can be your compass and your guide; we can help your family prepare for whatever the future may have in store.
Parents want to think the best of their children, but the fact is that many adult children lose their perspective in the wake of the death of a parent and end up permanently damaging their sibling relationships. When mom or dad dies the hurt and emotion takes over; insecurities come out, deep-seated rivalries make themselves known, and logic goes out the window. What all of this can lead to is years and years of brothers and sisters taking each other to court, spending thousands of dollars of your estate fighting over mementos and heirlooms, and lifetime relationships in shatters. . . Unless you have an estate plan.
A recent article by Scripps Howard News Service explains that the best way to prevent this from happening to your children is by creating a good estate plan. A good estate plan can be a great comfort to your children, and can save them thousands of dollars in probate and legal fees; and most importantly, a good estate plan is very clear about your intentions for your assets, leaving no room for court battles or ugly disagreements. But getting that good estate plan takes time and forethought—and the help of a professional.
A good estate plan takes into account the relationships and personalities of your heirs, as well as your own wishes. If one of your children has a problem with substance abuse, or if two of your children had a fight 10 years ago and still don’t speak, those things are considered in the creation of the plan. A good estate plan deals with small items and family heirlooms with emotional value, as well as real property and valuable liquid assets. A good estate plan is created with the idea of creating the best future for your heirs; it doesn’t leave the difficult decisions to be made by others when you’re gone.
If you would like to know more about how to smooth the way for your children and grandchildren, contact our office. We can help you create not just a good estate plan for your situation, but the best future for your family.
Probate: [from the Middle-English probat, from Latin probatum…] a : the action or process of proving before a competent judicial authority that a document offered for official recognition and registration as the last will and testament of a deceased person is genuine. b : the judicial determination of the validity of a will.
This Merriam-Webster definition of probate doesn’t make it sound so bad. Quite simply, it is the process by which the court determines the legal property of a person who has died, and decides to whom those assets will be distributed. It sounds like it should be simple… but somehow probate is hardly ever simple. Even in the best of circumstances there are procedures that must be followed to the letter, and the actual process (depending on the size of the estate and the laws of the state in which the property is being probated) can take anywhere from 6 months to a few years!
A good will can go a long way toward keeping the probate process on the short and easy end of the spectrum; but even with a will, much of your probate experience will depend on elements outside your realm of control. There are certain steps that must be followed to complete the probate process, including:
* the appointment of an executor or personal representative
* verification of the will
* taking an inventory of assets belonging to the deceased (which can be very difficult if good records have not been kept)
* giving notice to creditors
* paying valid claims against the estate
* preparing and paying taxes
* notifying beneficiaries (not all of whom will be easy to find)
* and eventually distributing the assets to the beneficiaries or heirs
If just reading the above takes your breath away, imagine having to actually go through all of those steps—and possibly more! The good news is that you don’t have to go through it alone, our office can help you navigate the tangled probate maze from beginning to end—from filing the first court documents to protecting your eventual inheritance—ensuring that your probate experience goes as quickly and smoothly as possible.
We publish a lot on this blog about preparing your estate plan: writing a will, setting up a trust, choosing beneficiaries and nominating guardians; but there is another side to estate planning, a fun side… the receiving end.
You may assume that the receiving end of estate planning is the fun and easy part, but that is not always the case. Coming into an inheritance presents its own questions and challenges; financial, logistical, and personal.
Receiving an inheritance always means you have to think about taxes. Estate taxes, income taxes, property taxes… The estate tax this year is not as clear as it has been in the past, and you will probably want to have an attorney or accountant help you with it. Whether or not you have help, you will absolutely want to keep paperwork on everything. This includes paperwork from any transfers of inherited property made by you, as well as any and all of the original paperwork you can find for the inherited assets.
There is a lot more to an inheritance than simply getting money and spending it. Are you the nominated guardian of young children, holding those assets in trust for their benefit? Or perhaps you are the beneficiary of a trust, and your receipt of the assets is subject to the terms of that trust. Do you have to use the money for school? Do you need to approval of a trustee before you can spend it? Hopefully you are working with a trustee you know and trust, but if you and the trustee disagree you may need mediation or even your own attorney.
Inherited property is almost always very personal and fraught with emotion. Should you really sell the house grandma lived in for decades and use the money to take a cruise? (If so, wait until after taxes to buy the tickets.) Would your parents have wanted you to use the money to pay for a wedding, or save it for your retirement? Do you want to take the summer home that’s been in your family for generations and own it jointly with your new spouse, or keep the property on your side of the family?
Whatever you choose to do with your inheritance, it’s likely you’ll need some guidance from a knowledgeable and trustworthy professional. Your estate planning attorney can help. Our knowledge of the probate system, estate taxes, and creating vehicles to protect your assets can answer your questions regarding the receiving end of estate planning as well as the planning.
When it comes to estate planning there are two major vehicles for the distribution of property: A will and a trust. Both are very useful tools and can accomplish specific goals—but how do you know which one is best for your family? Which document you will need depends on a number of factors, some of which may seem completely irrelevant at first: the size of your estate, your goals for that estate, the age of your children, your marital status, your retirement account, and many, many more. But the first step to understanding which tool may be right for you is to understand what each document does.
A Will: A will is a formal declaration of your wishes. It is a document you create to declare the extent of your privately held property (it does not cover jointly owned property) and what your wishes are for the distribution of that property. You name an executor to carry out your wishes, and you can even include a nomination of guardian for young children in your will. A will does not go into effect until after you die; before then it is simply a piece of paper containing your private wishes. However, once you have passed away your will no longer remains private, it now becomes a matter of public record, available to anybody who would like to view it, and overseen by the court in a sometimes lengthy and expensive process called probate.
A Trust: A trust is a far more extensive tool than a will. In fact, there are many different kinds of trusts, each of which may be used for specific situations. Most trusts created for estate planning purposes are revocable living trusts (or RLTs.) An RLT is a document created not simply to distribute your property, but to own your property on your behalf, to be invested and spent for your benefit or the benefit of your named beneficiaries. As such, a trust takes effect as soon as you sign it and your property is protected by and subjected to the trust parameters as soon as you place them in the name of your trust. There is a lot of flexibility available with a trust, and yours can be created to fit your unique situation. Most RLTs name the trust creators as the initial trustees, nominating individuals or banks to take over as trustee when the creator becomes incapacitated or passes away. The benefit of a trust is that when the creator passes away, property is not merely distributed and that’s the end of it; the creator can instruct the trustee to distribute the money slowly and in any number of ways, even to the extent of creating new trusts for each beneficiary. Trusts can last for generations, as evidenced by the enduring Kennedy trusts.
Wills and trusts are necessary tools in estate planning, each one working in unique situations. Your attorney will be able to tell you which one is best for your family.
How much do you know about estate plans? And how do you know when you need one?
Many people have a vague feeling that they should execute some kind of estate plan eventually, but think (hope) that they really don’t need one right now. On our blog we spend a lot of time telling people that they do need an estate plan, and they probably need one right now—or yesterday!—and we hope we do a good job of explaining why you need one. But maybe it’s time for you to decide when the time is right. This quiz will help you determine just when (and if) you need to do some estate planning.
1. Do you own a house?
Owning your own home means you have at least one significant asset, which affects your need for planning in a number of ways: First, a piece of property cannot be split between people, it will have to be sold (which can take months or even years) and the proceeds divided among your heirs—often at a loss, especially if the house was undervalued to sell quickly. Second, many people who feel they have “small estates and won’t have to worry about Probate or the estate tax” are surprised when they find that the value of their home does indeed push their estate over the line. Third, if you are married you may need to make provisions for your spouse if you would like them to be able to continue to live in your home.
2. Do you have minor children?
If you have minor children and have not made provisions for them in case of your death or incapacity the government will be in charge of their futures. This could mean your children are put in the care of foster parents or become wards of the state. That is not a chance you want to take.
3. Do you want your heirs to have to wait months (or years) before receiving an inheritance that is only a percentage of what you left them?
Probate is a long and expensive process. Without a plan in place your assets will have to be probated before they can be distributed. Not only does this often take years, but the probate fees (which can be considerable) are taken out of your estate—leaving less for your heirs.
4. Do you know how you want to spend your final moments?
Most people don’t die quickly and quietly at the ripe old age of 98. Most people fall victim to accidents, illness or dementia—unable to make their own health care decisions. Without a healthcare directive or living will that specifically outlines your wishes and instructions for your health care and nominating an agent to carry out those wishes, you could end up in a Terri Schiavo situation—costing your loved ones both financially and emotionally.
(NOTE: There is much that goes into your estate plan decision-making; this is only a partial quiz, and not a planning tool. Please contact our office for more information and an in depth interview to determine what kind of planning will be best for you and your family.)
Most people die in a hospital; sometimes after a long and slow decline, sometimes after a quick and unexpected tragedy. If you are an executor of the deceased’s estate this is significant because it means that there are usually final medical bills to be paid. What most executors do not know is that these final medical bills are not necessarily just like all the other final expenses, especially when it comes to filing a final tax return for the estate; this article from The Wall Street Journal explains why.
“…When a person incurs medical expenses and dies before they are paid, the executor of the decedent’s estate can elect to treat those medical expenses as if they were paid when incurred – as long as the estate pays the expenses within one year after the date of death. In other words, this election allows those expenses to be deducted on the decedent’s final Form 1040, even though they were not paid by the date of death.”
Many executors may not think of this because medical expenses can only be deducted if they exceed a certain percentage of the deceased’s adjusted gross income (7.5% to be exact); but health care being what it is, final medical expenses can quite often reach this point.
This sounds easy, but be careful if the deceased’s estate exceeds the $3.5 million estate tax exemption—you may want to look into other options. The Wall Street Journal suggests that in this case it might be beneficial to “forgo the election and count the unpaid medical expenses as liabilities on the estate tax return.”
As the executor of an estate you may have more options than you are aware of when it comes to taxes, probate, and achieving the best results for the beneficiaries. If you are unsure, contact a professional who can help advise you on all angles of the trustee or probate process.
The movies have given people certain expectations when it comes to a death in the family and probating a will; this Hollywood portrayal includes an attorney, a book-lined office, and the entire family assembled for a formal reading of the will which ends in shocked gasps as the entire fortune goes to an unknown and unlikely character. Inevitably, there is some intrigue surrounding a possible forgery of the will.
This Hollywood portrayal may be completely off base, but the basic premise is based on the very real feelings that come with the death of a loved one: helplessness, confusion, familial bonds, and sometimes even betrayal. Forged or secret wills may not be as common as the movies may have us believe, but as recent events and this article in the Wall Street Journal reveal, they aren’t completely unheard of either.
So what should you do if you suspect that the will of a loved one has been forged or tampered with? First of all, don’t try to deal with the situation alone. Dealing with the death of a loved one is stressful and emotional, and everyone—including you—is likely to be quicker than usual to react without thinking. Instead, seek the advice of a trusted third party, someone who can help you distance yourself and look at the situation objectively.
As mentioned in the article above, will forgeries are very rare, but incidents of testators (especially elderly testators) being unduly influenced are sadly not rare enough. If you suspect foul play was involved in the creation of a loved one’s will, make an appointment with an estate or probate specialist. We can help you work through your suspicions in a safe environment and explore your options should you feel the need to take action.