What is probate and how does is work?
When an individual dies owning real or personal property in his or her name, that property must, generally, go through probate. Probate is a legal procedure that establishes ownership of the decedent’s property in others. Whether an individual dies with a Will (testate) or without a Will (intestate), probate is often required to ensure the validity of a Will, to dissolve ownership disputes and rights, and to give notice to all possible claimants of property. Probate is not required for assets held in trust.
Generally, there are two (2) forms of probate:
Informal (or Common) probate covers estates that require little or no court supervision or adjudication due to clear, simple, and undisputed nature of the circumstances. The personal representative is fully responsible for the complete and legal distribution of the decedent’s estate. The personal representative will be able to act quickly under this informal form of probate with minimum court supervision.
Formal (or Solemn) probate applies to more complex or contested estates, and involves close court scrutiny of distribution. The probate court supervises the legal representative on each legal step needed to administer the estate, adding substantial time to the process. While more time consuming than informal probate, it is indispensable when complex issues and disputes are involved.
Most personal representatives hire any attorney to assist them with at least some of their duties. Although making a Will does not prevent the requirement for probate, a skillfully and carefully drafted Will does minimize the time required of the personal representative and speeds up the distribution of property to the heirs.
What are the different forms of personal representatives?
If the decedent dies with a Will (testate), then an Executor (male) or Executrix (female) will be the personal representative. If the decedent dies without a Will (intestate), then an Administrator (male) or Administratrix (female) will be the personal representative.
Do I get paid for serving as a personal representative?
Personal representatives will be reimbursed for all legitimate out-of-pocket expenses incurred as a result of the management and distribution of the decedent’s estate. The personal representative may also receive a statutory fee based upon locale and size of the estate.
Does a probate administer all property of the decedent?
Generally, probate is the procedure in which title to assets from the decedent’s estate are transferred to the beneficiaries. However, certain assets are called “non-probate assets” and are not passed through probate. These non-probate assets include (i) real property held in joint tenancy; (ii) retirement accounts with a designated beneficiary; (iii) life insurance policies; (iv) property owned by a living trust; and (v) bank accounts with “in trust for” or “pay on death” designations.
How much does probate cost and how long will it take?
Depending upon the value and complexity of the estate, the existence of a Will, and the location of real property owned by the estate, the cost of probate can vary substantially. Will contests and/or disputes with alleged creditors can also add significant cost and delay to probate. Common expenses of probate include personal representative fees, attorney fees, accounting fees, court fees, surety bonds, and appraisal fees. The total cost is usually around 2% to 7% of the total estate value. Assuming no litigation, most estates are settled through probate in about 9 to 18 months from the death of the decedent.
How can I change my Will?
Changes or additions to a valid Will are usually accomplished by adding a codicil. A codicil is a document that amends the will, with an equally binding effect. Wills cannot be changed by simply striking-through existing language or adding new provisions.
What are the advantages and disadvantages of a trust?
Trusts enable the Trustor (the person creating and funding the trust) to determine who receives the money and/or property, when they receive it, and what conditions, if any, must be met prior to distribution. The Trustee is the person or entity selected by the Trustor to manage and safeguard the money and/or property prior to distribution. The Beneficiary is the person or entity selected by the Trustor to receive the money and/or property.
Generally, there are two (2) forms of trusts:
A living (or inter vivos) trust is established during the Trustor’s lifetime. A living trust can be either revocable or irrevocable. A revocable trust usually becomes irrevocable upon the Trustor’s death. The most touted advantage of a living trust is the possibility of substantial tax benefits. Estate taxes may also be avoided. A disadvantage of the living trust is that this trust becomes effective upon creation. Although a revocable living trust is terminable at the will of the Trustor, while the trust is in effect, the terms of the trust control.
A testamentary trust is usually created through a Will and becomes effective upon the Trustor’s death. The major advantage of a testamentary trust is that the Trustor has control over his or her assets until death. Retaining control does have its disadvantages. For example, if the Trustor become incapacitated prior to death, the Trustee cannot take charge of the trust’s assets in order to manage the Trustor’s assets during that time. Another disadvantage is that survivors must probate the testamentary trust.
How do I choose a Trustee?
The choice of a trustee is a very difficult and important decision. The Trustee owes the Beneficiaries a fiduciary duty to act in their best interests. The Trustor should consider the burden posed by the trust’s administration. A Trustee can be any person or entity capable of taking legal title to real and/or personal property. Although it is not legally required for a Trustee to be notified of their appointment prior to creation of a trust, it is wise to choose someone who is willing and able to take on the required responsibilities. It is also prudent to appoint a successor Trustee in the event the original choice is unable or unwilling to perform the trust obligations when the trust commences. The Trustor should avoid possible conflicts-of-interest when selecting a Trustee. Many Trustors choose family or close family friends to act as Trustors. Others, prefer professional trustee institutions.
How can I leave property to minor children?
As a general rule, the law requires adults to manage children’s inheritance until the child reaches the age of majority (18 years of age). Thus, it is wise for the decedent to appoint an adult to manage the property bequeathed to a child. Otherwise, the court will appoint someone to manage and safeguard the property. Devises to children are usually accomplished using a trust, the Uniform Transfer to Minors Act, or property guardians. The best option depends upon the decedent’s goals, the size of the intended gift, and the age and character of the child(ren).
What are some other estate planning options?
- Guardians and Conservatorships: these are established for people who need a representative to oversee their own personal finances and/or affairs.
- Living Will: a document that provides advance directives on an individual’s healthcare preferences in the case of terminal illness and/or permanent unconsciousness.
- Power-of-Attorney and Power-of-Appointment: these documents allow someone to select an individual for responsibilities or benefits. A Power-of-Attorney permits appointment of another to act as his or her agent in certain situations and circumstances. A Power-of-Appointment allows an individual to designate an owner or recipient of property.
- Caregiver Agreement: document clarifying the duties, responsibilities, and compensation between an elderly family member and relative.
What do I do if I have another question?
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