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What is Probate
When a person dies their estate must go through probate to record their death and distribute assets to heirs. An estate administrator is responsible for reconciling the estate. Duties vary based on assets, outstanding debts and taxes, court caseload, and family dynamics.
Most often, probate drags on for months. During this time estate assets can depreciate in value or might have to be sold to pay off decedents' debts. The process is prolonged further if relatives contest the Will or if the decedent failed to prepare a last will.
How Does Probate Work?
Upon death, decedent Wills are filed through probate court. A case number is established so estate administrators can commence with their duties. Administrators are designated within the Will. If one does not exist an administrator is appointed by the judge.
Probate administrators open an estate checking account to record associated transactions. The estate is responsible for covering all expenses. This includes administration fees, attorney expenses, court courts, and payment of existing debts.
A variety of documents are prepared to provide evidence that creditor and tax obligations are fulfilled, as well as recording transfer of titled property and financial assets. Administrators are responsible for notifying government entities such as Medicare, Social Security, and the IRS, and must file a final tax return for the decedent and their estate.
The number one question people ask is how long does probate take? Unfortunately, there is no standard answer. The process varies by state and depends upon numerous factors. With that said, it typically takes up to a year to completely settle an estate that isn't bogged down by lawsuits and unpaid debts and taxes.
Two Types of Probate
Probate estates are identified as either testate or intestate. When decedents provide a last Will their estate is referenced as testate. When a Will is not provided the estate is known as intestate and must be settled in compliance with probate law.
It almost always takes longer to settle intestate estates because additional steps must be taken. Furthermore, settlement proceedings are closely monitored by the court which can further slow down the process.
Preparing a Will is easy and affordable. While Wills won't prevent the estate from enduring probate it does make settlement proceedings easier for loved ones. People who want to bypass probate will need to utilize other estate planning techniques. These might include designating beneficiaries to receive financial investments and titled property or setting up trusts.
Ways to Avoid Probate
One of the more effective ways to avoid probate is to establish a trust. Since there are numerous kinds of trusts it is advisable to seek help from a lawyer. Along with helping people choose appropriate strategies, attorneys can also offer guidance for lessening estate and inheritance taxes.
A large majority of people utilize living trusts, while others prefer family trusts and trust funds for children. Some people need to set up more than one kind, such as adding a charitable, special needs, or irrevocable life insurance trust.
Other methods to prevent probate involve designating beneficiaries to receive titled property and financial investments. The manner in which real estate and motor vehicles can be bequeathed to beneficiaries varies by state, so seek legal counsel to ensure methods are compliant.
Making Use of Power of Attorney
Power of attorney is part of estate planning as it allows people to carry out responsibilities when you're unable to do so. This could include letting an agent handle your finances during times of illness or while recovering from surgery. Or, agents could run a company that you own and be allowed to perform all the necessary duties.
The kind of POA used depends on required tasks. Common forms include limited, general, durable, and medical.
Power of attorney privileges expire upon death. In order for agents to continue carrying out duties associated with the estate they must be appointed as an estate administrator or Trustee.
Wills and Small Estate Exemptions
People who do not own much property may find that executing a last Will is all that's needed. Most states offer small estate exemptions which let administrators bypass the majority of probate if a Will is presented to the court.
State exemption rates vary, but generally fall between $25,000 and $150,000. Administrators will find it helpful to work with a lawyer to reconcile small estates. Attempting to close a probated estate without help can result in delays and unexpected expenses.
Now that you have a better understanding of what is probate and how it effects estate settlement, we hope you're inspired to put affairs in order. Not only can you rest assured knowing assets are protected, but also by making things easier for loved ones during their time of grief.