Posts Tagged ‘liens on inheritance’

Probate: Secrets to Keep Inheritance Assets Out of Probate Court

Probate is used to validate the Last Will and Testament of a person who has died. Probate involves taking inventory of assets, obtaining property appraisals, clearing outstanding debts, locating missing heirs, and distributing assets according to decedents’ directives.

Probate typically lasts between four and nine months. When family discord arises or heirs contest the last will, the probate process can drag on for years and potentially bankrupt the estate. Heirs who contest the Will are responsible for their legal fees. If a probate judge rules in their favor, the estate must compensate the plaintiff’s attorney.

Actions can be taken to avoid probate and exempt assets from inheritance taxation. One of the most common techniques is to execute a revocable or irrevocable trust. A trust is a container that holds the last will and protects assets from undergoing the probate process.

Trusts are managed by an appointed Trustee. Legal title to property is transferred to the Trustee and held in the trust. Property and assets held in a trust are not considered as part of the estate and thereby avoid probate. Individuals can designate their self as Trustee and appoint a second Trustee to administer the estate upon their death.

Trusts are generally reserved for estates valued over $100,000. However, techniques are available to protect assets for smaller estates. These include establishing transfer on death and payable on death beneficiaries, as well as gifting.

Transfer on death (TOD) beneficiaries can be designated for investment accounts, 401k, and retirement accounts. The proceeds can be divided equally amongst multiple family members, or given to one individual. If you have two children and five grandchildren, you could designate 25-percent of the funds to each child and 10-percent to each grandchild.

TOD can be used to transfer motor vehicles to a named beneficiary. Not all states allow transfer-on-death assignments. If your state does not allow establishment of TOD beneficiaries, you can add the recipient’s name to the vehicle title. A death certificate must be presented to the Department of Motor Vehicles, along with the original title in order to have the title transferred to the beneficiary’s name.

Many people elect to avoid probate by gifting their property while they are still alive. This option is appealing to individuals diagnosed with terminal illness. The elderly also prefer gifting their assets to loved ones; particularly if they require treatment in a nursing home or assisted living facility.

Gifting property, assets and cash reduces the size of the estate and lowers probate costs. It also ensures your loved ones will receive the inheritance you wish to give them. Estate planning experts claim less than 20-percent of beneficiaries receive inheritance when the estate is probated.

Probate is a time-consuming and costly process that can be avoided by taking time to engage in estate planning. Executing a last will does not prevent probate; however, dying without a will can cause all kinds of problems.

It is not difficult to draft a Will or engage in estate planning. Probate lawyers charge a nominal fee to draft a simple last will. Estate planners offer advice and solutions to best protect your family in the event of your death. Taking time to develop a plan now will save your loved ones from having to endure additional stress while they are grieving.

Delinquent Taxes