What You Need to Know About Probate
Are you looking for peace of mind that your estate will be handled properly after you’re gone? With careful estate planning strategies, you can save your beneficiaries from costly probate proceedings and provide them with more of their inheritance. Read on to learn the basics of probate, how it can affect your estate, and options to avoid it.
Understanding Probate Basics
Probate is the legal process that takes place after a person’s death to authenticate their will, settle debts, and distribute assets. It involves a series of steps executed under court supervision and can have a significant impact on your loved ones. Probate can be a lengthy process, which can result in prolonged periods of anxiety and stress for your estate beneficiaries. The probate process can take anywhere from six months up to two years depending on the complexity of your estate, including the value of your assets, the number of beneficiaries, and any disputes
that may arise.
Probate can be an expensive process, with court fees, legal fees, and other expenses, which can be a significant financial burden on your estate. The executor of your will must allocate a portion of your assets to cover these expenses, reducing the amount that beneficiaries will ultimately receive. It is essential to note that these fees and expenses will vary depending on the size of your estate, location, and legal requirements.
Additionally, probate is a public process. Court documents related to the probate process which includes your will are available to the public. This means that your beneficiaries’ names, addresses, and other confidential information will be exposed. This lack of privacy can lead to unwanted attention, including solicitation from creditors or scammers.
Probate can be a lengthy, expensive, and public process that you may want to avoid for the sake of your loved ones. Through efficient estate planning, you can limit the assets that go through probate, or even bypass it altogether, safeguarding your estate and ensuring a smoother transition of assets to your beneficiaries.
Probate Pitfalls: Effects on Taxes and Creditor Claims
One of the major pitfalls of probate is its potential impact on estate taxes. Probate assets are subject to estate taxes, which can significantly reduce the size of the inheritance left to beneficiaries. This is especially true if the estate is large, as the tax rate increases proportionally with the value of the estate. Furthermore, probate can also lead to double taxation; the assets may be subject to estate taxes, and the income from these assets may also be subject to income taxes.
In addition to taxes, probate can also subject the estate to creditor claims. When an estate goes through probate, creditors are notified and given a chance to make claims against the estate for any unpaid debts. Before any assets are distributed to the beneficiaries, the debts must first be settled. This process can reduce the value of the estate and delay asset distribution. Moreover, the public nature of probate can expose the estate to fraudulent claims, adding another layer of complexity and potential loss.
Determine the Best Planning Strategy for Your Estate
To select the best planning strategy for your estate, start by understanding the nature and value of your assets. This will help determine which estate planning documents are the best vehicle to accomplish your goals, such as a will, a trust, or combination. A will is a legal document that outlines who will receive your property and how it will be divided among your heirs after your death. Be mindful that a will must go through probate court, which can be costly and time-consuming.
A trust can help you manage your assets while you are alive and distribute them upon your death to your beneficiaries, avoiding probate court altogether. There are various types of trusts, each tailored to address specific goals and circumstances. One of the most popular and effective estate planning strategies is a revocable living trust. This type of trust allows you to maintain control of your assets during your lifetime, specify how they should be distributed at your passing, and ensure that your wishes are followed without having to go through probate court.
It is essential to work with an estate planning attorney to determine the best strategy to meet your goals. An experienced attorney can explain the tax implications of each option, ensure that your assets are properly protected, and guide you through the legal process.
Another important factor to consider in selecting an estate planning strategy is your beneficiaries. For example, if you have young children, a trust can provide long-term protection and management of their inheritance until they are old enough to manage it on their own.
It is important to regularly review and update your estate plan as your circumstances change. Changes in your family, marital status, financial situation, or goals all necessitate a review of your estate plan.
Choose an Executor or Trustee Who Will Carry Out Your Estate Plan
A key element of estate planning is choosing an executor or trustee who will be responsible for carrying out your estate plan after your death. Your executor should be someone trustworthy and competent, as they will be in charge of managing assets and ensuring debts are paid. Consider talking to a qualified lawyer to help you choose the right executor or trustee for your situation.
There are several different types of executors and trustees:
Professional Executors or Trustees are individuals or institutions that have legal expertise in managing estates. They often include attorneys, accountants, or trust companies, like Members Trust. Choosing a professional fiduciary to serve as executor or trustee is a way to ensure that your estate will be handled in the most efficient and professional manner as possible.
Family Executors can reduce costs and provide a personal touch to the execution of your estate. However, it is important to consider the potential emotional burden and the complexity of your estate. Complex estates or contentious family dynamics might necessitate a professional executor/trustee.
Independent Executors are individuals who are neither family nor professionals. They can provide a neutral perspective and act without bias in carrying out your wishes. They may be friends, colleagues, or long-term acquaintances.
Public Administrators might be appointed by the court if an executor has not been named or the named executor is unable to serve. The role of the public administrator is to protect the assets of the deceased until a personal representative can be appointed.
Each type of executor or trustee comes with its own set of benefits and potential drawbacks. The choice largely depends on the complexity of your estate, your relationship with potential executors, and your personal preferences. Discuss your situation with an estate planning attorney to make the most informed decision.
Do You Need Assistance with Estate Planning?
At Members Trust Company, we understand that estate planning can be a complex process. We’re here to make it simple. Our team alleviates the burden of probate by offering a comprehensive suite of services designed to meet the unique needs of each client.
Our first step is getting to know you and your goals for your estate. We will take the time to thoroughly review your assets and liabilities, as well as any legal documents you may already have in place. Using this information, we will work with you and your attorney to create a tailored estate plan that meets your specific needs.
One key strategy we utilize to help our clients avoid probate is the establishment of a revocable living trust. You can transfer your assets into the trust while maintaining control over the management and distribution of those assets during your lifetime. Upon your passing, the trustee will distribute the assets according to your wishes, without the need for court involvement. We can serve in several capacities, including trustee, co-trustee, and executor.
Additionally, we work with clients to ensure that their estate plan is updated regularly to reflect any changes in their life circumstances. This includes updating beneficiary designations, reviewing legal documents, and addressing any changes in tax laws that may affect their plan.
At Members Trust Company, our goal is to provide our clients with peace of mind that their assets will be distributed according to their wishes while minimizing the stress and expense of probate. Contact us today to learn more about how we can assist you with your estate planning needs.
Non-deposit investment products available through Members Trust Company are not deposits of or guaranteed by the trust company, a credit union or credit union affiliate, are not insured or guaranteed by the NCUA, FDIC or any other governmental agency and are subject to investment risks including possible loss of the principal amount invested. Members Trust Company, owned and managed by America’s credit unions, is a special purpose federal thrift regulated by the Office of the Comptroller of the Currency. Past performance is not indicative of future results. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant. Any opinions expressed are those of the presenter and do not necessarily reflect the position of Members Trust Company. The information above is obtained or compiled from sources we believe to be reliable. We Do Not Guarantee that such information, will be free from errors, omissions, whether human or mechanical, nor do we guarantee their timeliness, accuracy, or completeness.
