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Understanding the Probate Process
Understanding the Probate Process When deciding to create an estate plan, and specifically, set up a Last Will and Testament to lay out your final instructions and distribute your estate, you want to make sure your loved ones are provided for. You want to protect them from dealing with important financial and other after-death decisions. What happens with your estate after you die? Is the transfer of assets to your beneficiaries immediate? Even if you have a will, your estate must still go through the process of probate. What is probate and is there a way to avoid this legal procedure? Probate Basics Probate is defined as the legal process during which a person’s Last Will and Testament is reviewed and determined to be valid. This procedure is handled by the probate court and begins after the testator (creator of the will) dies. The probate court works with the appointed executor of the will to settle debts and disperse the estate as instructed in the will. Depending on the size of the estate, the process can take anywhere from a few months to over a year. The executor of the will is the appointed representative over the testator’s estate and is responsible for working with the court, settling any outstanding debts, and distributing the estate to the intended beneficiaries. Probate Steps The probate process generally occurs in the following steps: The will must be presented to the court within 30 days of the testator’s death. This is generally done by the custodian of the will (i.e. an attorney or the executor). The court officially appoints the executor and this person begins collecting all necessary information regarding the testator’s estate. This includes, insurance policies, property deeds and titles, and financial account statements. The court must prove the presented will is legally valid, which may include testimony from the document’s two witnesses. One way to speed up this part of the process is to include a Self-Proving Affidavit in the will to attest to the validity of all parties’ signatures. The executor then begins working with the court in creating an inventory of the testator’s estate. They are required to file copies of financial documents, deeds, or titles collected. The executor must also determine the validity of any debts against the estate and make arrangements to pay the balances. Probate “ends” when the estate has been inventoried, the debts have been cleared, and the remaining assets and property are distributed to the beneficiaries. Probate Exceptions Most of the testator’s property and assets will go through probate, although there are a few exceptions: Any joint-owned property will automatically transfer to the surviving owner and will not be involved in the probate process. Any assets or property placed in a living trust are exempt from probate. Any financial accounts that specifically name a beneficiary may also be exempt from probate. Avoiding Probate There are a number of ways you can avoid probate, or at least limit the assets that must go through the process: Add a joint owner to your property (i.e. spouse, child, family member). Ownership interest will automatically transfer to the surviving owner. Give away property or items in your estate prior to death. Add direct beneficiaries to financial accounts or insurance policies. The assets will automatically transfer. Transfer real property to beneficiaries with a Transfer on Death Deed. This only goes into effect after the owner dies. Create a living trust and add assets and property for chosen beneficiaries. Creating a trust allows you to have control over your estate before death and ensures a quicker distribution of assets without the hassle of probate. You can use both the living trust and the Last Will and Testament together so everything is taken care of.
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Wills and Marriage Laws
Wills and Marriage Laws If you created a Last Will and Testament as a single individual, being married can impact previous decisions made in your will. There are certain laws regarding spouses that can change the terms of your estate plan. Some states, known as “community property states,” require certain portions of a person's estate to be given to their spouse upon death. Even if the spouse is specifically excluded from the person's will, there are some requirements that still must be met. Some of these include 401K accounts, pension accounts, and some IRAs. You still have some control over your estate and how it is distributed upon your death to an extent. This is the primary reason for creating a will. You need to be aware of some inheritance laws that offer a level of protection to the surviving spouse. Community Property Vs Common Law The inheritance rights of spouses come down to your particular state of residence, whether it’s a “community property state” or a “common law state.” Community Property States: Arizona California Idaho Louisiana Nevada New Mexico Texas Washington Wisconsin A community property state rules all assets and property gained during the marriage are considered owned by both spouses. If you purchased property or earned money before you were married, those assets are considered as your belongings only. However, if you purchase a home or open a financial account during your marriage, your spouse is entitled to half that asset. Many people may only consider community property laws in relation to divorce proceedings, but these laws also affect inheritances. In the other 41 common law states, assets or property gained in a marriage are not automatically considered belonging to both spouses. You can purchase a home and only list yourself as the owner on the deed. Even if you are married, your spouse does not automatically own any part of that property. Divorce and Your Will A divorce decree automatically severs your former spouse’s rights to your estate in most states. The dissolution of the marriage automatically terminates that spouse’s claim to your estate. It would still be wise to update your Last Will and Testament and make the necessary changes regarding your beneficiaries and your estate. If you are in the middle of divorce proceedings that have not been finalized, you can create an “interim will” to serve as a placeholder until the other legal matter is completed. Non-Citizen Spouses and Wills Even if your spouse is not a US citizen, they can still receive assets and property through your will. Non-citizens, however, are not exempt from the Federal Estate & Gift Tax (applied to inherited assets over $5.45 million). Financial gifts between spouses who are both US citizens are exempt from this tax, which includes any assets received as an inheritance. The Joint Will You and your spouse may be considering the idea of a joint will instead of two individual documents. There are pros and cons to this option, and ultimately, the final decision has to do with your preference. The most common “con” for a joint will is it can quickly become long and complicated. It may not allow each spouse to address their individual wishes and instructions in the proper way. The most common “pro” for the joint will is the simplification of choosing beneficiaries and dividing the joint estate.
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Writing Your Own Will
Writing Your Own Will Are you among the 50 percent of Americans who haven’t created a Last Will and Testament? If so, it’s time to put together an estate plan to account for all your final wishes and instructions. This process begins with a Last Will and Testament. Writing a will may seem complicated and scary because it makes you think about your own death. It is simpler than you might assume. To get started, create a timeline you want to follow for this influential document. Just as you would plan out a strategy for tackling home projects, you also need a plan for writing your will. Remember Why An estate plan can be thought of as a “love letter to loved ones.” What’s a better way to show your family and loved ones how much they mean to you than making sure they are provided for after you’re gone? A will is much more than distributing your estate. It also details your final wishes regarding funeral preparations and other instructions you want to leave behind for the people you care about. Having this legally binding document prepared takes stress off the shoulders of family who are already dealing with the strong emotions of grief and loss. Think of a will in a positive light by remembering how better prepared you and your loved ones will be in the future. Importance of Creating a Will What if you do not create a Last Will and Testament? What if you choose not to leave final instructions for your loved ones? Without a will (or living trust), your estate is overseen by the probate court. The process for your family to receive assets and property can take months. Additionally, your estate may or may not be distributed how you would want and may end up tangled in legal disputes. Without a will, everything is up in the air and at discretion of the probate court. Although this project may not be the most fun to tackle, lack of preparation of this document could end up adding a lot of stress and complications for your loved ones. Adjust Your Mindset and Emotions Behind the Process Your anxieties regarding the creation of your own will might decrease a bit once you actually start the process. You certainly have to take the time to make sure all of your information is correct and you have gathered all necessary paperwork. It may also help to think small instead of the overarching long run. Instead of trying to design an estate plan of what could happen within the next 40 or 50 years, consider the present and what your wishes would be if something were to happen within the next two to five years. You can always adjust your plan as you go through life to match a long term plan. Getting Started When prepping to start this project, set up a timeline and schedule for creating your will. It doesn’t have to be completed in one sitting. You can break up each task so the work doesn’t appear as daunting. Although you can create a legally valid Last Will and Testament without the assistance of an estate attorney, it may help to have a consultation with a trained professional. This can help you be sure you're on the right track and you are meeting all necessary legal requirements. You can use document preparation sites such as Complete Wills to create a custom and personalized will without the hefty expense of an attorney. The process is simple because you can receive complete instructions for each step of the document.