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Building wealth is only half the job. Protecting wealth for your loved ones and yourself is equally important. Through estate planning, business planning, and asset protection, our firm will help you save everything you love — family, friends, and favorite charities. For more information, be sure to visit our website, where you will have access to our blog, events schedule, and a complimentary newsletter subscription!
Fundamentals of Probate, Trusts and Estate Administration
The ultimate goal of estate planning is to preserve relationships among those you care about most by providing sound leadership about who will wind up your affairs and how the assets will be distributed. How much effort this takes depends upon many different factors: estate size, types of property owned, the state of residence, and the number of heirs, to name but a few. Also, keep in mind that These duties are usually carried out, even with the best of planning, by someone who is grieving and dealing with overwhelming emotions, both their own and often those of many other family members.
Probate and Non-Probate Assets
When the person uses a last will and testament, they plan on their estate to pass through probate, a court-supervised process. This process begins with the validation of the will by the court and the court’s approval of the executor nominated in the will. There are court fees, and court appearances are sometimes required.
The executor, or personal representative, is in charge of managing the estate. Some of the tasks include creating an inventory of assets and liabilities, filing the decedent’s last tax return, obtaining an EIN for the estate, filing the estate tax return, paying creditors, distributing assets, securing the home, and notifying heirs of the decedent’s death.
During probate, the will becomes part of the public record. Anyone, from disgruntled relatives to creditors and thieves, may view the will’s contents and inventory.
Probate is often confused with estate administration. Even if most or all assets have been taken out of the estate to avoid probate, there are still some administrative tasks, including filing the decedent’s last tax returns for state and federal taxes and, if necessary, filing an estate tax return.
Depending upon the jurisdiction and the complexity of the estate, probate may take a few months or several years.
What is Trust Administration?
Many people chose to place their assets in trusts to avoid having their estate pass through probate and exposure to the public record. Trust administration refers to the actions taken by the trustee: the person appointed in the trust to be in charge of managing assets. If the trust was created to distribute assets after death, the trustee follows instructions for property distribution to beneficiaries. Trust administration responsibilities vary greatly. One trust might instruct the trustee to make sure beneficiaries reach certain milestones before receiving all or part of their inheritance. Another trust may direct a percentage of the legacy to be released at certain ages. Still, other trusts continue to administer the estate for multiple generations.
Trusts are preferred by many because of privacy. Information about assets is solely between the trustee and the beneficiary. No information appears in the public record, and the court is not involved. The use of trusts may minimize the likelihood of lawsuits brought by heirs and creditors.
Trusts are also used to help if a person becomes disabled and can minimize elder financial abuse since the only person who can access the trust is the trustee.
Some Assets Pass Through Beneficiary Designations
Even without a trust, many assets do not pass through probate. Accounts with beneficiary designations, including pensions, retirement accounts, insurance policies, and financial accounts with TOD ownership, (Transfer on Death), joint bank accounts, and any account bearing a beneficiary designation are transferred directly to the beneficiary, after proof of death and identity has been accepted by the financial institution.
Whether passed through probate, trusts, or beneficiary designations, a well-organized estate plan and communications between the appropriate family members will make distributing assets post-mortem a more straightforward process.
Is this a Do It Yourself Project?
There are many alternatives to putting an estate plan in place. We are often needed to clean up situations where a well-meaning person has committed severe blunders in planning themselves. The best thing about doing it yourself is that you will never know if it worked or not. Unfortunately, guidance and experience are essential in the drafting and implementation of your plan.
Don’t let the lasting legacy of your life be tainted by being too penny-wise.
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