Probate will is the legal process by which the authenticity of a will is proven to the satisfaction of a state court designated for this purpose. If there is no valid will, approval will be given to the disposition of the estate's assets under the state's intestacy law. When a will is probated, it is publicly recorded.
Estate planning legitimately may seek to keep as much of the estate as possible out of probate. Among the reasons:
A will is publicly recorded. But if an individual is more concerned about the confidentiality of his affairs than about the public's right to know, he could, in complete privacy, transfer the desired property to an irrevocable trust, the assets to go to his secret beneficiary upon his death without the knowledge of anyone except the trustee. And the trustee could be an impersonal bank.
Fees paid to executors and to estate lawyers are usually a percentage of the value of assets passing through their hands. Any assets kept out of probate because they are not part of the decedent's property when he dies won't be part of the basis for administration charges by the professionals.
Time: Since the probating of a will is a legal and judicial process, it can be very time-consuming. If a person places assets in trust for the benefit of a named party or parties, for distribution immediately upon his death, the beneficiaries can receive their entitlements quickly.
Liabilities: Under very real circumstances, an executor can be held personally liable for federal estate taxes if he distributes assets to beneficiaries without leaving enough resources to pay these taxes.
A timid executor (and that includes experienced attorneys who know all too well how expensive this personal liability can be) often stubbornly refuses to distribute anything to the will's beneficiaries until he has made his peace with the IRS. That could take years.
The use of a trust will keep these assets out of the hands of an overcautious executor whose own misgivings are of more importance to him than are the needs of beneficiaries.
Challenges: Beneficiaries (or non beneficiaries) under a will may challenge distributions which are spelled out there. There may be family squabbles about who should get what. But when property has been held in joint ownership with right of survival, this prearranged disposition scheme takes place automatically when death occurs. The assets are not part of the estate which the executor submits for probate.
Insurance: Insurance proceeds are often counted on to meet the immediate needs of beneficiaries while the rest of the estate is being administered. But if the policy is made payable to the executor in his or her official capacity, or to the estate, the insurance payout will have to pass through probate. Making the policy payable directly to the beneficiaries avoids this problem.
It's a touching gesture to name a spouse or grown child an executor. And they'll also get to keep the estate's administration fee (which can run to 4% or more of the gross estate). The fee would otherwise go to an outsider.
True, the relative (most often the widow) may not have any specialized knowledge of estate administration matters, but so what? An experienced lawyer and accountant can be hired to see things through. You might even supply a few recommended professionals to help when the time comes.
Life-and death-aren't that simple, however. Point: The executor is personally responsible for estate-tax liabilities and late filings, as well as for making sure that the estate is distributed in accord with the will. He or she is not relieved of this responsibility by delegating to a lawyer the task of "doing whatever is necessary."
Exception: In a very few cases, courts have waived personal penalties when an executor with no business or tax experience, and with scant formal education, had relied upon a seasoned lawyer to take care of the matter. Warning: The great weight of court authority is to the contrary.
An executor also may have to pick up the bill personally if he or she distributes estate assets to beneficiaries so that there isn't enough left to pay federal taxes. That would happen if there was any reason to suspect that the IRS would still be owed money.
Example: An IRS agent warns the executor that the value of shares in a closely held corporation as shown on the federal estate tax return probably will be jacked up.
The executor may also be held personally responsible for unpaid taxes if the IRS had not put him on notice that more taxes might be payable. See probate will for more information.
One case: An executor spoke to an officer of the bank where the de cadent had conducted his business. She was informed that the decedent hadn't paid any federal tax on his considerable earnings for years. This should have alerted her to the fact that estate assets couldn't all be distributed to heirs without leaving enough for what Uncle Sam would demand. The IRS was paid out of her own funds.
Another liability: An heir can hold the executor personally responsible for the amount the heir may have lost through mismanagement of the estate's assets.
Other problems for a spouse:
A spouse, in particular, may be too emotionally upset to do a competent job as executor. That has happened even when the spouse was an attorney with vast estate-tax experience.
A spouse or other really close relative is also at a disadvantage in gathering all of the estate assets as required by law. Relatives and friends may insist that money or property which the decedent had lent to them really had been intended as gifts, with an alleged "understanding" that the advance would be forgotten when the decedent died. A widow would have the unpleasant task of trying to collect from her husband's relatives-or of having to sue them. A common occurrence in such cases: The widow instead fails to report assets of that type on the estate-tax return, then gets caught by the IRS.
Another danger: An executor might regard her husband's will and its property dispositions as sacrosanct, to be honored at all costs-including the cost to herself.
Example: State laws generally allow a widow a certain percentage of her husband's estate, such as 35 %, as dower rights. If he leaves her a lesser amount, she can "take against the will" and get this 35% at the expense of other beneficiaries. But, to preserve family sensitivities, the executor might refuse to tamper with her husband's instructions and hence would be shortchanging herself.
The saving on administrative fees is not large enough to make that the basis for selecting a family member. An individual is not subject to federal tax on what he or she inherits. But if the widow is executor, the IRS may claim that part of what she inherited actually had been intended to be payment for administering the estate, and she will be assessed income tax on it.
The other side: Consider the potential expense and other consequences of being an executor. That should help to shape your response if a relative or friend flatters you by inviting you to serve as his executor. Even if they offer you a fee, it may not be worth it.
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Preventing the probate process accelerate the transfer of assets to beneficiaries can save money, and maintain family secrecy. For avoiding probate some activities are pretty easy, but others might need the help of a knowledgeable estate preparation, tax and probate lawyer.
Probate is a legal procedure, in which a court (frequently a specialized probate court) manages the distribution of an individual's property upon departure. Anyone is appointed by the court to ensure the remaining property is transferred to the appropriate parties, and that all debts are paid. When there's no will, property distribution will be controlled by the state's probate law to the deceased person's next of kin. The property is distributed in accordance with the will to probate a will. It's important to recognize that the will will not avoid probate.
The expenses associated with probate include paper publication prices, filing fees and lawyer fees. For an estate that is average it's going to take from about half a year to two years. Including worth and the nature of assets, the individual's debts, and that will get the assets.
Discovering the best way to avoid probate needs making any needed changes, and looking at possession of property is now set up. It also frequently calls for tax concerns. So, what exactly are a few tips to prevent probate?
One of the ways to prevent probate would be to transfer property before you expire. You can not give away your property all because you'll need some of it. Nevertheless, presents can be a part of an entire estate plan. The primary drawback to a present is the fact that you have the property's usage.
Create Shared Possession for Real Estate
Property which is jointly possessed using a survivorship right will prevent probate. If one owner dies, name passes automatically to the owner that is continuing. You will find three forms of shared ownership with survivorship rights:
Title passes to another owner when one passes away.
This simply applies to married couples, although accessible in a few states, it is just like joint tenancy with rights of survivorship.
Additionally limited to married couples, that is just accessible in the event you reside or own property in Wisconsin, Arizona, California, Idaho, Nevada, Texas or Alaska.
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