Estate Administration and Probate

Estate Administration, also referred to as probate, is the legal process in which ownership of a deceased person’s property is passed to his or her beneficiaries.  It includes:

  • the presentation of a valid Will by the chosen Executor
  • the appointment of an Administrator when there is not a valid Will
  • the gathering of assets
  • the payment of debts, taxes, and administration expenses
  • the distribution of the estate pursuant to the Will or state law when no Will exists.
To ensure that your affairs are in order at your death or incapacity, you should have the following four items that constitute a basic Estate Planning Package:
  1. Will:  This document specifies the transfer of your property, appoints an Executor to manage your affairs, and appoints a Legal Guardian to care for your minor children. 
  2. Business Power of Attorney:  This document appoints an Agent to act on your behalf on a legal or business matter. 
  3. Medical Power of Attorney:  This document appoints an Agent to make decisions on your behalf regarding your health care.
  4. Living Will:  This document contains your directives regarding treatment decisions when death is imminent.

 Additional features of an Estate Plan may include:

Trusts 

 This document transfers the ownership interest in certain or all of your property to a third party called a trustee, while giving a beneficiary interest to yourself or   someone else of your choosing.  You can create a trust while you are alive, or upon your death through instructions in your Will. 

Placing property in a trust will:

  • remove it from the probate process
  • protect your assets from creditors and other people who seek to assert a claim
  • reduce your estate taxes
  • ensure that the assets are managed responsibly when the beneficiaries are minors or are adults who cannot manage their own affairs.

The different types of trusts that may benefit your specific situation include:

Living Trust:  A Living Trust is created while you are alive and can be revocable or irrevocable, based on your needs.  Although you no longer own this property, you   can have access to your assets based on the specific instructions in the trust document.  You can even choose to appoint yourself as the trustee.  At your death, any remaining property would be transferred to your beneficiaries.  This trust is created to avoid probate and protect your assets from creditors.  You may also reduce your estate taxes, based on how the trust is structured.

Minor’s Trust:  Trust created to benefit a minor child that protects the child’s assets and also qualifies for the annual federal exclusion from paying gift taxes.

Marital Deduction/QTIP Trust:  Trust that shields the assets of both spouses from federal estate taxes when they die through use of the “marital deduction” in section 2056 of the Internal Revenue Code.

Credit Shelter/Bypass Trust:  Trust that ensures the maximum use of federal and state exemptions available to both spouses. 

Disclaimer Trust:  Trust that allows the surviving spouse to disclaim property from the deceased spouse’s estate and transfer it to the trust entity to achieve a tax savings.

Life Insurance Trust:  Trust that is created for the purpose of owning a life insurance policy to enable the proceeds of the policy to be distributed free of estate tax and protect beneficiaries.

Retirement Account/IRA Trust:  Trust that is created to become the beneficiary of an individual’s retirement account to avoid estate taxes and protect beneficiaries.

Special Needs Trust or Supplemental Needs Trust:  Trust that is created to protect the assets of a disabled person and enable access to essential government benefits.

Charitable Remainder Trust:  Trust in which property is donated to a charity, but the donor continues to use the property or receive income from it while living.  Besides leaving a lasting legacy to a favorite cause, the donor avoids any capital gains tax on the donated assets, receives an income tax deduction for the remainder interest earned by the trust, and avoids estate tax on this property.