Probate is expensive, time consuming and part of the public record. Learn more here, including how to avoid it.
What is Probate?
When a loved one dies, it is always a tragic occasion, regardless of the circumstances or the beliefs of the survivors. However, in the midst of the grief are particularly devilish procedures that must be completed in order to avoid legal implications. One of the most important issues that must be faced is probate. While people hear this word all the time, few are sure what is truly involved until they have to pursue the process themselves. Unfortunately, those most directly involved in probate are usually quite stressed and not in a state of mind to absorb the details of the process.
Probate is literally the legal settling and distribution of the estate of the deceased. Sometimes, the process is made simple, with most details of passing on the estate taken care of by documentation completed during living years or through community property laws. However, if there is no will or living trust, a probate court will review a listing of all the decedent's holdings, dispersing the funds as necessary first to cover any debts owed by the deceased, followed by a legal distribution of the estate to the next of kin or other relatives staking claims.
If a will exists, there is generally an executor, or someone who was designated by the deceased to enact all requests of the will. This person is charged with collecting all documentation of accounts and presenting the information to the probate court for consideration, as well as with seeing that all beneficiaries of the will receive their proper due. The person chosen for this responsibility must be level headed and able to function under the most stressful, unpleasant circumstances with businesslike precision. Learn more about avoiding avoiding the Wyoming probbate process.
In the event that any property goes into probate status, the process is not simple or quick. Typically, the probate process takes months or even a year in some cases, depending on the size of the estate, the number of different accounts and holdings, and how many possible beneficiaries there are. It also depends on the complexity of the laws regarding probate within each state. Unless there are complaints, claims against the will, and other complications, many probate courts are very informal in the processes and will usually agree to the prioritization as determined by the executor. If no executor is appointed by the decedent, the court will appoint one and then most likely follow the advice of this administrator. Complications usually only arise when bitter relatives feel they deserve something they did not receive.
What is Probate and How Does it Affect Inheritance?
What is probate is a vital question. Estate planning experts claim 80-percent of heirs and beneficiaries do not receive intended inheritance. Estate taxes, unpaid debts, funeral expenses, and legal fees can bankrupt the estate; leaving nothing for those left behind.
This article simplifies the "what is probate" question and offers suggestions on how to keep assets out of probate. The less complicated the estate, the faster it processes through the court system.
Probate is used to validate decedents' Last Will and Testament and tie up loose ends. The Will is used to outline your final wishes and state who you want to receive personal belongings, money, real estate and whatever else you own.
Many options exist for executing a last will. Wills can be as simple as downloading a form online to establishing trusts through a professional estate planner. Much depends on your net worth and how many people you want to share it with.
A probate executor is appointed within the Will and responsible for a variety of duties. It is best to designate someone who is good with finances and can cope well under pressure. This is particularly true if family disharmony exists.
Most probate executors will require some assistance from an estate planner or probate lawyer. Probate commences when the decedent's death certificate is filed through the court. The executor must take inventory of assets; obtain property appraisals for real estate, antiques, collectibles and other valuable items; pay outstanding debts; and distribute assets according to the Will.
The probate process generally requires six to nine months to complete. This can be difficult for estates with real estate or business holdings. The estate must continue maintaining the property and paying mortgage payments. If the estate does not possess financial means to maintain upkeep, the court can order the property or business to be sold.
Probate also provides a platform for heirs to contest the Will. When family members are left out or intentionally disinherited, they have rights to lay claim on what they believe is rightfully theirs.
Initially, the plaintiff is responsible for legal fees. If the court rules in favor of the plaintiff, the estate must reimburse legal fees. Contesting the Will can suspend probate for years and bankrupt the estate. In most cases, the only people who win are the lawyers.
Smaller estates can employ estate planning techniques to keep assets out of probate. These include designating transfer-on-death (TOD) beneficiaries for investment and retirement accounts, and payable-on-death (POD) beneficiaries for checking and savings accounts.
POD and TOD beneficiaries can be assigned by filling out forms at the bank or investment firm where accounts are held. Accounts with POD and TOD beneficiaries are exempt from undergoing probate.
Real estate can be titled as 'Tenants in Common' for easy transfer to named beneficiaries. Automobiles, boats, motorcycles and airplanes can be jointly titled and transferred to a named beneficiary.
Last, but not least, assets can be given to loved ones while you are still alive. The IRS allows individuals to gift up to $10,000 per person, per year or $20,000 per married couple. This option is particularly attractive to individuals with chronic or terminal illness.
Probate can be a difficult and time-consuming task. Take time now to prepare a last will and testament and take measures to keep assets out of probate. Doing so is the best gift anyone can leave to the ones they love the most.
What is Probate Inheritance?
Probate inheritance refers to financial and personal assets gifted to heirs through death. In many instances, inheritance is designated in the decedent's Last Will and Testament. However, if the decedent died without leaving a Will, inheritance assets must be distributed according to probate laws. Probate is the legal process used to validate the Will or determine rightful heirs when no Will exists.
Probate inheritance can consist of anything which belonged to the deceased person. Assets can include cash, automobiles, real estate, businesses, jewelry, artwork, collectables, household furnishings and other personal belongings.
On average, probate takes between six and nine months to complete. If the decedent did not execute a Will prior to their death or if family discord exists, probate can last for two or more years. Much depends on the complexity of the estate and amicability of family members. Another factor of probate is the number of cases being processed.
Probate prohibits inheritance property from being distributed to designated heirs until the estate settles out of probate. The exception to the rule is if a probate judge authorizes partial distribution. If heirs need cash for their inheritance, they can assign their inheritance rights to a funding company in exchange for a lump sum of cash.
In order to obtain cash for inheritance, documentation of pending assets must be provided to the funding source. A fee is charged for the cash advance and can amount to as much as 40-percent of the borrowed amount. Once probate settles, the estate reimburses the balance owed to the funding source.
An estate executor is assigned to administer assets held in probate. The person appointed to this position is usually a spouse, child, brother or sister of the decedent. Estate executors are designated within the Will or appointed by a probate judge.
Estate administrators are responsible for multiple duties. The estate must be inventoried and appraised to obtain a value. Outstanding financial obligations must be paid before any cash can be distributed to beneficiaries. If real estate is involved, the Administrator is responsible for maintaining the property. Mortgage payments, property taxes, and insurance must be paid throughout the probate period.
If real estate holdings create a financial burden for the estate, the Administrator can petition the court and request permission to sell the property. If multiple heirs are entitled to the real estate, all heirs must agree to the sale unless a judge orders the Administrator to liquidate the property.
Several options exist to keep property out of probate. Assets can be placed in a living trust or irrevocable life insurance trust. Trusts are usually reserved for estates valued over $100,000. Estates valued at less than $100,000 can keep a portion of assets out of probate by designating Transfer-on-Death and Payable-on Death beneficiaries.
Funds held in checking and savings accounts can be transferred to beneficiaries upon death by using Payable-on-Death (POD) forms. POD forms are available through banks and only require the account holder to fill out a short form. Beneficiaries are unable to access funds until specific forms have been processed and sufficient documentation provided to the bank.
Transfer-on-death forms are used to transfer retirement accounts and financial portfolios to named beneficiaries. TOD accounts are typically paid-out within 45 days of death.