February 3, 2015
There are two kinds of probate at death: intestate and testate.
An intestate probate proceeding means that the decedent had no legal last will and testament at the time of death.
The attorney for the estate must file legal documents with the court. There are court filing fees, and a judge will appoint an executor who must research the decedent’s records, personal belongings and all leads to locate the assets of the decedent.
The executor then must make a distribution to the heirs according to statutory laws of the state where the decedent lived. The verbal wishes of how the decedent’s assets should be distributed to heirs will have no bearing on the distribution of decedent’s assets.
A testate probate proceeding means that the decedent had a legal last will and testament at the time of death. Assuming there is no successful challenge to the last will and testament by an interested party, the attorney for the estate must file detailed multiple required legal documents.
There are court filing fees, a notice to creditors must be published, and an inventory and accounting of all the assets must be filed with the court. The assets will then be distributed according to the bequests made by the decedent in the last will and testament, according to the National Center for the Avoidance of Probate.
The probate process validates:
- That no last will and testament existed or guarantees the authenticity and legality of your last will and testament
- The heirs of the decedent
- Proof of the assets
- That all creditors have been paid
- That your financial custodians may safely release your savings accounts, stocks, real estate, etc., into the possession of your legal heirs
The probate process may take 12 to 24 months, depending on the state in which decedent was domiciled at death, the assets in the estate and resolution of creditor and beneficiary disputes. The expensive and sometimes agonizing probate administration process typically costs between 3 and 15 percent of the estate, according to the Estate Research Council.
The probate process provides court supervision when heirs of an estate do not get along, the beneficiaries are unhappy with their distributions or unplanned creditors file claims against the estate. The creator of the will should carefully vet their personal representative if they believe the personal representative might not carry out their intentions.
A last will and testament estate plan will provide the essential details of who will inherit your property, when and how they will inherit it and who will be put in charge of settling your final affairs. If you have minor children, a guardian must be appointed for them until they become adults.
A revocable living trust estate plan covers these important points but avoids the probate process. The person in charge of settling your final affairs after you die is called a successor trustee.
By avoiding probate, none of your personal information is filed with the court; no attorney’s fees are needed to draft the detailed legal documents; no court filing fees are involved; and your successor trustee can step right in and act immediately on your behalf to carry out your wishes.
Officially called a revocable inter vivos trust, a living trust is the only way to get assets out of your name and maintain complete control of them.
A revocable living trust allows the settlor who created the trust to revoke any provision or the entire trust. Any beneficiary can be changed at any time by its creator. It is a written agreement that covers phases of your life while you are alive and well, if you become incapacitated and after you die.
Once the trust agreement is signed, you will need to re-title your assets in the name of your trust. The process is called funding the trust, which means you instruct your financial custodians to replace the original title, deed or account to the asset with a new title that designates the asset is owned by your trust rather than by you.
Your name still appears on the title, but now as the trustee rather than as the owner, according to estate planner Julie Garber. Only after your revocable living trust has become the record owner of your assets will assets owned by the trust instead of you avoid probate. Assets held in trust ownership avoid probate, the expensive services of an attorney and court filing fees at death.
Revocable trusts can be considerably more costly to set in place than a will and take some footwork. For most individuals, cost would typically begin at $1,500 to $1,800, varying considerably in different parts of the country. This would include a basic plan with durable power of attorney, healthcare directive, will, revocable living trust, deed transferring the home and instruction to the bank to get accounts into the name of the trust.
The price also varies depending on the size of the estate. For wealthy individuals who may require transfer of business interests, own property in different states and need other documentation, the cost may rise to several thousand dollars.
This article was originally posted on February 3, 2015 and the information may no longer be current. For questions, please contact GRF CPAs & Advisors at email@example.com.