|
|
|
|
| Estate PlanningWhat Happens After You Die?When you die, the court will step in and review the estate before they allow the executor to distribute any assets. Understanding a little bit about how this process works will help you design your estate in a manner that will help you get over this hurdle as easily as possible. The longer it takes, the longer your loved ones will have to wait to get the assets you want them to have.
Probating The Estate
The process of reviewing your will and estate by the court is called Probate. The court in the state in which you live when you die will review the will to see whether it is authentic and consistent with state law. It will consider any arguments from people who feel the will should be overturned or from a spouse who is exercising the right of election. The courts will also make sure that all debts are settled, and that all taxes are paid. Once the will is validated and the executor can satisfy the courts that all claims have been paid, then he or she is free to pay out the balance of the estate to the beneficiaries in the will.
Based on the complexity of your estate and whether you owe estate taxes, probate can take a long time. Typically, the probate process takes a few months to a year. Remember, your heirs will not get their inheritance (money they might need to live) until the process is complete.
Minimizing The Delays In Probate
If you want to streamline the probate process, and make sure that you get the assets to your loved ones as soon as possible, follow these steps:
1.) Have A Valid Will
This is the single most important thing you can do to speed up the probate process. When you die without a will (as discussed later in this chapter), the courts will appoint attorneys and accountants to serve as administrators for the purpose of valuing your estate and supervising the process of liquidating it. These individuals are paid from estate property, which will reduce the amount of the inheritance going to your heirs. If you have a will and an executor, the chances of speeding through probate improve immeasurably.
2.) Consider Placing Out-of-State Real Estate In A Trust
Each state in which you own real estate (property) has the right to probate your estate. This can be expensive, especially if your executor has to travel back and forth to represent the estate. Talk to an attorney or other estate planning professional about placing the real estate in a trust while you are still alive. This will still enable you to enjoy the property, yet remove it from your probate estate.
HOT TIP: If you are on Track 2, you may want to consider talking to your attorney about a trust for your real estate that would help minimize any estate tax as well.
Make Sure You Have Adequate Insurance And Other Non-Probate Property
Even if the What’s Your Estate Worth Worksheet that you prepared shows that you expect to leave behind a large amount of wealth for your family, if all the assets are probate assets, you may be creating a situation of hardship while the courts are reviewing the estate. Look to see which of your assets are non-probate assets (assets in joint name, pensions, IRAs, life insurance not made payable to your estate). If you think the remainder of your estate is less than adequate to provide for your family during probate, then you may want to buy additional life insurance. Remember, do not make the insurance payable to you or your estate.
What’s The Big Deal About Probate?
If you have listened to any financial planning expert, he or she has probably warned you about the difficulties of probate. They may have even recommended that you hire them to help you create a Living Trust. A Living Trust is a trust where you are both grantor and trustee. You place all your assets into this trust and spell out how to distribute the principal when you die (as you would in a will). Property held in a living trust does not pass through probate court before it reaches the people you want to inherit it. A side benefit of the living trust is the trustee you pick as an alternate will have an easier time accessing assets (if you become incapacitated) than will an agent acting under a Power of Attorney form.
Although there are cases where the probate process can get very complicated, in most cases it is not that big of a deal. Creating a living trust can be expensive (you have to transfer ownership of all your assets to the trust), and it doesn’t always avoid probate completely since there may be assets that you will own outright. Since you control the assets in the trust by being the trustee, the assets are included in your estate for tax purposes (we’ll discuss this later), so Living Trusts do not save estate taxes. Many people, therefore, do not really need living trusts. Discuss this with your attorney when you are reviewing your estate plan.
When You Don’t Have A Will
We already discussed how the courts will choose guardians for your minor children, and select attorneys and accountants to serve as administrators for your estate. There are also rules each state follows on who gets your assets when there is no valid will. These rules are called the Laws of Intestacy. Generally, your spouse will get your probate estate outright or share it with your children.
Sample Intestacy Rules
Though each state is different, a person might have his or her estate divided in the following order without a valid will:
Spouse and Surviving Children then... Surviving Grandchildren then... Parents then... Siblings then... Grandparents then... Aunts or Uncles then... Cousins then... The State where the property is located (it’s treated as abandoned property.)
The rules are different for every state so make sure you check with your attorney to get the specifics.
Nightmares Without A Proper Will
| Situation |
What Happens Without a Will |
You have a husband and a young child.
|
The State may force a percentage (probably half) to go to your young child and the balance to your husband. This means your husband may not have the money he needs because half the estate is tied up in restricted accounts for your child. This also means that as soon as your child reaches the age of majority (18-21, depending on your state), he or she gets the money with no strings attached. |
You do not want any of your money to go to your son; only your wife and brother.
|
The State will probably split your estate between your son and your wife, effectively cutting out your brother. |
| When you die, you promise the house to your daughter for all her devotion, care and financial support. Your son ignored you for many years. |
The State will probably split the estate between your daughter and your son. Your daughter may never recoup the support costs she incurred on your behalf. |
| You do not want your assets going to your adult children but to your place of worship. |
The State will assign assets to family members first. |
| Both you and your spouse are in an accident. You die at the scene of the accident; your spouse dies the next day. |
Your estate will go to the family of your spouse if you have no children. Your family gets nothing. |
Article Content by Truebridge, Inc. All rights reserved. Copyright 2001-2010 |
|
|
 |
|
