Wills and Probate
Wills and probate usually go hand-in-hand. Wills outline the wishes of a person who has died. Also known as the decedent's Last Will and Testament, the Will must be validated through the probate court. The probate process allows heirs to contest the Will if they believe the decedent was not of sound mind or under the influence of another at the time they executed the document.
Under the best of circumstances, validating wills and probate usually takes between six and nine months. However, if heirs contest the Will or dispute its contents, the probate process can potentially drag on for several years. In order to contest a Will, heirs must hire a probate attorney.
Although heirs must pay for attorney fees out of their own pocket, if the probate court rules in their favor the decedents' estate will be responsible for reimbursement. Attorney fees and legal litigation can quickly deplete financial assets held by the estate.
There are several ways to transfer assets to loved ones and avoid probate altogether. One of the most popular choices is to transfer assets to a living trust. The trust is a container which holds the Will and valuable assets. Specific language is included as to how the assets will be distributed. In most instances, living trusts are reserved for estates valued at $100,000 or more.
Irrevocable life insurance trusts are another safeguard technique used to avoid probate. Life insurance trusts are used to exclude death benefits from estate taxes. In essence, ILITs consist of a contract which administers life insurance proceeds for named beneficiaries. Life insurance trusts are primarily used to safeguard death benefits from estate taxes. The downside of irrevocable life insurance trusts is once assets are transferred, the trust cannot be altered.
Individuals who own retirement accounts and financial investments can designate transfer-on-death beneficiaries. For instance, if the decedent was married and has three children, he can split the proceeds in his financial accounts four ways. Twenty-five percent of the money would be distributed to each beneficiary.
Specific forms must be obtained from the Tax Assessor's office where the decedent resided. These forms are required to ensure the decedent did not owe taxes at the times of his death. As long as taxes are current, the Assessor's office will sign-off on the forms and distribution can be made. This process generally takes 5 to 7 business days.
Individuals who possess checking and savings accounts can request payable-on-death forms to designate beneficiaries. Similar to transfer-on-death, POD beneficiaries must submit forms to the Tax Assessor prior to distribution of assets.
Automobiles, recreational vehicles and water craft can be titled in two names if the decedent wants to give the automobile to someone in the event of their death. For instance, one of my clients mother owned a vehicle and added her daughter's name on the title. When my clients' mother passed away, she took the title and a copy of the death certificate to the Bureau of Motor Vehicles and had the titled changed to her name. She then added her daughter's name to the title so if anything happened to her, her daughter could easily take possession of the vehicle.
Wills and probate can be a nightmare for your loved ones; particularly if family strife exists within the family. It is important to engage in estate planning while you are in good health. Otherwise, heirs can claim you weren't of sound mind and drag out probate until no funds are left.
We encourage you to learn more about wills and probate by perusing our estate planning article library. Here you'll find dozens of articles to help you determine which type of estate planning is best suited for you.