It requires meticulous preparation to make the probate procedure easier for your family and heirs. Learn how to create an estate plan that keeps the procedure to a minimum.
What you’ll discover:
What are the advantages of skipping probate?
What happens to assets and funds during the probate process?
Is there a tax advantage to avoiding probate?
How should I structure my estate plan to avoid probate?
How can I make the probate procedure easier for my family?
Most estates are divided via probate when a person dies. Most individuals are unaware that probate costs money, slows and complicates the transfer of a dead loved one’s property, and may be avoided with adequate prior preparation. There are various advantages to avoiding probate, and doing a little estate planning study now may make things much simpler for loved ones later on.
What are the advantages of skipping probate?
Each state has its own threshold for determining whether or not a dead person’s estate must go through the probate procedure. This is often a monetary figure that varies by state; in some areas, it is as low as $50,000 and as high as $200,000. Even if the estate is under the price criteria, real property might trigger the probate process. If the probate requirement is met, the probate judge makes the ultimate decision on how an estate is divided, and the estate distribution takes place in court. If there are issues or delays, the probate procedure might take months or even years. An estate may be dispersed quickly if probate is avoided.
What happens to assets and funds during the probate process?
The assets and money in the estate cannot be dispersed completely to the beneficiaries while the probate procedure is continuing. The assets are first totaled to ascertain their current worth. The probate judge may also designate a court official to manage the probate procedure. This individual is often compensated from the estate’s assets, which might reduce the value of the estate if the procedure takes too long. Whether an estate is vast or small, these problems may arise throughout the probate procedure.
Is there a tax advantage to avoiding probate?
Most estates are exempt from federal taxation because the taxation threshold is so high, presently $12 million or more. Many states have their own estate tax, with substantially lower limits. In general, avoiding probate does not imply avoiding state estate tax if the estate exceeds the threshold. Tax advantages may be available if a Living Trust is established to avoid the probate procedure. This permits certain assets to flow automatically to the beneficiaries via the trust, avoiding the payment of capital gains tax if the beneficiaries choose to sell assets that have appreciated in value.
How should I structure my estate plan to avoid probate?
There are various techniques available to help you avoid probate. A Living Trust is one kind of trust, while a Pour-Over Trust is another.
A Will is an essential component of estate planning. It serves as a collection of instructions for your executor, informing them of your wishes regarding all of your assets, whether they are a property, a car, bank or brokerage accounts, or personal goods. However, if all you have is a Will, your executor must still “probate” the Will, which consumes time and money from your estate. If you wish to keep your assets out of probate, you should set up a Living Trust and then include a pour-over trust in your Will.
Once you’ve established a Living Trust, you may include whatever assets you hold at the time. Because these assets are under a Living Trust, they may escape probate. Unfortunately, this does not imply you are completely secure, since events in your life may need modifications to your inheritance. You may sell some assets and buy others, but you could forget to transfer your new assets into the trust along the way. Only assets in the trust are exempt from probate. Any additional assets you may have acquired but failed to include in the Trust are subject to probate. You may, however, avoid this problem by inserting a pour-over trust in your Will. This implies that when you die, whatever assets you hold are “poured” into the Trust, even if they were not previously a part of it.
How can I make the probate procedure easier for my family?
The greatest approach to make the probate procedure easier for your family is to prepare ahead of time so that your heirs may avoid as much of it as possible.
