Often, the first real test to an estate plan (or lack of an estate plan) comes after the individual passes away. Here is where the determination is made how much, if any, of that person’s assets will have to go through probate. Any asset that is not either owned by a trust has an appropriate beneficiary designation (like a POD designation), or a joint owner (which is not recommended for anyone other than your spouse), will have to go through probate. Probate is the process of the Court determining who are the appropriate heirs of a deceased person’s assets. Unfortunately, probate is an expensive (3%) and time-consuming process that most people would prefer to avoid if possible.
One of the most popular misconceptions in estate planning is that if someone has a will, it helps avoid probate. All a will really does is give the probate judge instructions on what they should do with your property IF they have jurisdiction over that property. This means that the ONLY way a Last Will and Testament will have any real force is if the estate is going through probate.
Why do I want to avoid Probate?
Probate has three basic steps. First, the Court is made aware of the death, and someone asks the Court to be named as the administrator (either the Personal Representative or Executor, depending on whether the deceased had a will). Second, after someone is nominated to be in charge of the estate, they have to give an Inventory to both the Court and all of the heirs. The Inventory is a snapshot of the assets that were owned by the deceased as of their death. Third, after a minimum of six months has passed, the estate can be closed if an Accounting is filed (assuming there are no outstanding claims of either a creditor or disgruntled family member). The Accounting explains what happened to all of the assets since the person passed away and what the administrator is proposing to do with the rest of the assets (who gets it, and how much each heir will get). In Missouri, an attorney is required for any probate estate that has more than $40,000.
Does having a trust make post-death administration easier?
Even if a person has a revocable trust, there is still administration that needs to take place. Assets must still be consolidated, final bills paid, and ultimately, distributions to the heirs. The difference is that with the trust, the administration can be done for a fraction of the costs, and at the family’s pace instead of the State’s rules and procedures.
Using an experienced estate planning attorney for the administration ensures that your assets get where you intended them to go, that the likelihood of family squabbles is diminished, and can also save significant funds by knowing the proper tax elections and timing of sales and making distributions. Even the best estate plan can be weakened by sloppy administration. Getting the proper advice from the Weeks Group is designed to make both the administrator and the heirs lives simpler and easier!
What is Probate & Why Does Everyone Want to Avoid It?
After a loved one passes away, their estate often goes through a court-managed process called probate or estate administration, where assets are managed and distributed. If a living trust is properly drafted and funded, it is likely that no probate process is necessary. The length of time needed to complete the probate of an estate depends on the size and complexity of the estate.
What is a Living Trust?
A Living Trust is a legal document that dictates instruction for the management of your assets after you pass. A Living Trust allows for the transfer of your assets without unnecessary probate or court interference. It also allows for the management of your affairs in case of incapacity. Ideally, a properly-conducted estate plan using a Living Trust will allow your family to manage your estate privately, with less cost and confusion.
What are the advantages of having a Living Trust?
A Living Trust dictates instruction for the management of your assets after you pass. It allows for the transfer of your assets without unnecessary probate or court interference. It also allows for the management of your affairs in case of incapacity. Ideally, a properly-contructed estate plan using a Living Trust will allow your family to manage your estate privately, with less cost and confusion.
Will I Lose Any Control Over My Property if I Create a Living Trust?
Transferring property to a Revocable Living Trust should not affect your ability to control your assets. You should have complete control over all your assets through your lifetime (unless deemed mentally incompetent). As the trustee, you may perform any transactions you wish. Because a Living Trust is revocable, it can be modified or revoked at any time. Upon your incapacity, durable power of attorney takes effect and allows designated family members to operate on your behalf according to your specific instructions. Upon your passing, your Living Trust can no longer be modified and the designated successor trustee(s) can proceed to implement your wishes as directed.
Do I Have to Transfer All My Assets to my Living Trust?
Assets with beneficiaries such as a life insurance or annuities need not be transferred to your Living Trust during your lifetime, but you will commonly name the Living Trust as the beneficiary of the policy. Furthermore, money from IRAs, Keoghs, 401(k) accounts, and most other retirement accounts transfer automatically, outside probate, to beneficiaries. When planning your estate, you should consult an attorney about the specific laws governing retirement plans in your state. We give all of our clients written instructions on how to transfer or retitle all of their assets as they complete their Living Trusts. We are always available to answer questions on transferring assets at no additional charge.
If I Transfer Property to my Living Trust can the Bank Accelerate My Mortgage?
Federal law prohibits financial institutions from calling or accelerating your loan when you transfer property to your Living Trust as long as you continue to live in that home. The only exception to the federal law, enacted as part of the 1982 Garn-St. Germain Act is that it does not provide protection for residential real estate with more than five dwelling units. However, we find that most clients who do own residential property with more than five dwelling units tend to own them through a business entity and not directly in their individual names and hence are not concerned with the five dwelling exception.
What Happens if Someone Objects to the Will?
An objection to a Will, also known as a “Will contest” is a fairly common occurrence during the probate proceedings and can be incredibly costly to litigate.In order to contest a Will, one has to have legal “standing” to raise objections. This usually occurs when, for example, children are to receive disproportionate shares under the Will, or when distribution schemes change from a prior Will to a later Will. In addition to disputes over the tangible distributions, Will contests can be a quarrel over the person designated to serve as Executor.
Does Probate Administer All Property of Deceased?
Probate is primarily a process through which title is transferred from the name of the deceased to the names of the beneficiaries. Certain types of assets are what is called “non-probate assets” do not go through probate.
- Property in which you own title as “joint tenants with right of survivorship”. Such property passes to the co-owners by operation of law and does not go through probate.
- Retirement accounts such as IRA and 401(k) accounts where there are designated beneficiaries.
- Life insurance policies with named beneficiaries.
- Bank accounts with “pay on death” (POD) designations or “in trust for” designations.
- Property owned by a living trust. Legal title to such property passes to successor trustees without having to go through probate.