In the United States, inheritance law is governed by the Uniform Probate Code. In place since 1969, UPC is a statute that outlines what happens to assets, debts, and financial affairs of a deceased person. Currently 18 states have adopted the Uniform Probate Code in its entirety, while the remaining 32 states have adopted parts of it.
Although inheritance law varies by state, the majority adhere to similar processes. First, an estate executor must be appointed. Oftentimes the executor is appointed through the decedent's last will. If no will exists, or the appointed estate executor does not want to accept responsibility, an Administrator will be appointed through probate court.
Probate executors are required to settle decedents' debts, pay taxes and funeral expenses, and distribute remaining assets according to inheritance law dictated by the state where the decedent resided.
When decedents execute a last will it must be validated through probate court. The probate process requires individuals listed as beneficiaries to be notified. Inheritance property must be appraised to determine estate value. Outstanding debts must be settled prior to beneficiary disbursements.
When decedents die intestate (without a last will), inheritance law states the estate must undergo probate to determine rightful heirs. This process is different for each state; however disbursements typically go to the surviving spouse, children or family members.
Unless inheritance is over $2 million, beneficiaries will not have to pay inheritance tax. If the estate is valued at more than $2 million, taxes will be charged on any amount over the exemption threshold. Regardless of whether taxes are owed or not, beneficiaries are required to file an inheritance tax return which detail inherited property.
In order to retain control over how your assets are distributed upon your death, it's crucial to engage in estate planning. While no two estate plans are identical, there are certain legal documents that can expedite the process and eliminate stress from beneficiaries.
First, make a Will. Most attorneys offer this service for a nominal fee. Additionally, legal forms can be downloaded at no-cost via the Internet. In order for a will to be legally binding, it must be witnessed by two adults and notarized by a Notary Public.
In addition to executing a will, consider establishing a trust. Property which is transferred into trusts is not required to undergo probate. Trusts are administered by a Trustee and inheritance property is transferred to named beneficiaries upon death. Typically, trusts do not incur additional legal or court costs and inherited assets can be transferred within a matter of weeks.
Another way to avoid probate is to appoint payable on death beneficiaries for bank accounts and retirement plans and transfer on death beneficiaries for stocks, bonds, vehicles, and real estate. When POD and TOD beneficiaries are assigned, assets are exempt from probate.
Many people postpone executing a last will and testament because they consider it an inconvenience. However, if you do not designate who you want your assets transferred to, the state will step in and do it for you. Making arrangements for distribution of inheritance property prior to death is the only way to ensure that your loved ones will receive what you want them to have.
While it may be difficult to think about dying, you owe it to yourself and your loved ones to develop an estate plan. Doing so will provide you with peace of mind and prevent loved ones from unnecessary stress in the future.
Published on January 11, 2010 at 02:39 AM | Comments: 1