Tuesday, July 24, 2012
You wouldn’t want to leave your family intestate when that inevitable time comes. That’s why you have to have foresight and protect their future by preparing and arranging for the distribution of your properties or estate. That is what estate planning is all about—properly taking care of your properties that you leave behind to your loved ones, whether they are family or friends.
There are things you should consider in estate planning to minimize uncertainties over the administration of a probate and get the most out of the value of the estate by reducing taxes and other expenses.
1. Identify a temporary guardian to take care of your children just in case you are unable to do so. Appointing permanent guardians will be specified in your will and will take effect on your death. There are available documents that will fill the void left in most estate plans.
2. Everyone over 18 years of age needs an estate plan. Encourage your children, friends and relatives to have an estate plan. It doesn’t need to be complicated. Besides, incapacity and death aren’t just for old people.
3. If you have pets, consider setting up a trust for their care so they won’t be put in a shelter or put to sleep.
4. Consider using an asset protection trust to protect your children’s inheritance from divorce, bankruptcy, and lawsuits.
5. Identify who gets what. If you fail to do so in a will, laws governing your domicile will determine who gets your assets, including your non-financial assets.
6. Think of ways to minimize taxes on the amounts your beneficiaries will inherit by using tax-efficient strategies. A common practice is leaving your taxable assets to charitable institutions and your tax-free assets (such as Roth retirement accounts, life insurance and after-tax savings) to your other beneficiaries. Another practice to reduce your taxable estate is by gifting amounts to your beneficiaries while you’re still alive—nontaxable gifts are under $13,000 for each beneficiary.
7. Most often than not, your beneficiaries stand to lose a large amount of money to estate and income taxes. Consider offsetting taxes with the proceeds from your life insurance. For example, your estate planner has estimated that your beneficiary will owe the government $1 million in estate and income taxes; you can buy a life insurance plan for $1 million and name the affected party as the beneficiary. Life insurance proceeds are tax-free so the entire $1 million can now be allotted to pay the taxes owed.
Learn more on the benefits of estate planning and how to efficiently make it work for your beneficiaries by working with an estate planning attorney. It is best to work with a local attorney for he/she is more knowledgeable with the laws of the area or state where you reside.
Tuesday, July 10, 2012
Probate is a legal procedure of authenticating the will of a deceased person and making sure that the person’s estate is distributed following the wishes of the person or state law (in the absence of a will). In the process, all obligations and debts of the decedent must be settled prior to the distribution of the estate to the named heirs.
The procedure seems simple enough. However, the probate process can be extremely time-consuming. More than the dollars and cents involved; the time involved in administering a probate in California may be a more compelling reason to avoid a probate.
Massive cuts in the budget have caused widespread layoffs in the courts of California. This has resulted in further backlogs, not only in probate cases, but even in divorces and simple traffic violations. With these layoffs, I believe a probate case will now take up to 2 years to settle. This will be especially difficult to heirs who need their inheritance right away.
What does this mean? It simply points to time and the delays incurred as the biggest reason to avoid probate, especially in California. Delays in the probate process not only mean that the legal heirs will have to wait longer to get their inheritance; they will receive their inheritance after the deductions of court fees and costs. It must be noted that, in legal procedures, longer court procedures will result in higher court costs.
So that you understand how this process works, probate begins with the appointment of an Administrator or Executor who will oversee the entire probate process. Then there is the process of validating that the will is authentic and prepared by the decedent with a sound mind. This involves studying the document and certifying that it isn’t forged. Then, there is the process of identifying and assessing the assets in the estate. The process also involves informing creditors of the probate process so that they will come forward and collect what is due them. The debt will be paid or from the estate. The remainder of the estate will then be distributed to the heirs designated by the decedent.
As probate is a legal process, the procedure is handled by the courts. For simple estates, probate can be as short as six months in the less impacted counties. This, however, is the exception. Bigger, higher valued and more complicated estates will undergo a probate process that may take one to three years – and possibly more. Other delays beside court layoffs are often caused by people contesting the valuation of the estate and the ownership of the estate (whether it is solely owned by the decedent or he/she is simply part owner of the asset). A very common cause of delay is court lawsuits filed by people claiming to be legal heirs. You can imagine people wanting to have a piece of the pie, so to speak.
The creditors may also cause delay as they may file suits as to the exact amount of the obligation and time frame they would like to give the decedent. The executor also may be a factor in the delay. If the executor fails to act or acts very slowly, he or she will delay the procedure.