Do you need guidance on your estate? Start with our answers to the most frequently asked questions.
Everything a person “owned” or “owed” when they pass away refers to his/her estate. You do not have to be wealthy to have an estate. In fact, even people who are impoverished have estates. Estates, regardless of whether they are for someone wealthy, middle class, or in poverty, have to be administered. It is important to note that there is a difference between “probate assets” and “non-probate” assets.
Generally speaking, probate is simply one small part of an estate administration.
Probate usually refers to the process by which someone gets formally appointed to administer a deceased person's estate.
An estate administration or estate settlement is the act of closing out, wrapping up, accounting for, and distributing everything a deceased person owned to the intended beneficiaries. Everything a deceased person “owned” refers to his/her estate.
Ancillary probate is a secondary probate proceeding to administer and distribute “out-of-state” property. If a deceased person owns a probate asset that is located in a state other than his or her state of residence, that secondary state generally requires an additional probate filing/proceeding in order for you to administer (i.e. obtain, manage, and distribute) that property. This is a very common occurrence when someone dies owning real estate in more than one state (for instance, a vacation or secondary residence). Estate planning attorneys can (and should) present people with estate planning strategies to avoid ancillary probate by avoiding probate in that secondary state.
Avoiding probate means to use your estate plan to eliminate the need to prepare and file a formal court proceeding to open an estate in the state where someone died or owned property. Estate planning strategies used to avoid probate often include the preparation of a specific type of Will called a “pour-over will” and a “revocable living trust.” However, it is important to note that for nearly every estate plan, avoiding probate involves many more steps than obtaining proper estate planning documents, after all, the Will and Trust are just the tip of the iceberg. In many states such as Florida (and more recently, New York), the formal probate process used to get an estate opened so that it can be administered can be costly, time consuming and stressful. Interestingly, as we have discussed, probate is usually only the beginning of the time, costs and stress associated with administering an estate.
A non-probate asset is property which has a named beneficiary or was jointly held and passes directly to that surviving joint owner or named beneficiary. Non-probate assets are sometimes collectively referred to as the deceased’s “non-probate estate.”
A probate asset is property which did not name a beneficiary. Because no beneficiary is named, the property passes pursuant to the directions in the deceased property-owner’s/account holder’s will, and thus requires the probate process to administer. It is also known as his/her “probate estate.”
It is important to note that just because an asset is not part of the probate estate does not mean that it does not count as part of the deceased person’s estate for tax purposes. Whether or not an asset is/is not part of a formal probate process is immaterial as to whether or not it is part of the decedent’s taxable estate or whether an inheritance tax will be assessed on the surviving beneficiary/joint owner.
The costs and expenses of an estate administration are: Probate/court filing fees, the deceased’s last expenses, carrying costs of assets (i.e. property taxes, security systems, insurance), funeral and memorial expenses, shipping of tangible property, investment management fees, transportation, postage, fiduciary commissions, appraisal fees, cleaning and moving, junk removal, legal and accounting fees, property sale closing costs.
Whether or not these expenses are deductible is a different story, as are the do’s and don’ts of taking a deduction.
Yes. The process of closing out someone’s estate (estate administration) varies from state to state. Each state has its own requirements, rules and laws related to how to open, manage, and close an estate. This is particularly important when it comes to probate - as the probate process varies depending on what state where the decedent held property or resided. For instance, the probate process in Virginia may be very different than the probate process in California, as the laws in each of these states are different with respect to how property is owned and what is required to settle an estate.
Luckily, Trustate is available to work with estates in every state within the United States. No matter whether you are in Pennsylvania or Texas, Trustate can help you navigate the administration process.
The types of taxes that can be associated with estate administration are: inheritance tax, state estate tax, federal estate tax, generation skipping transfer tax and estate income tax. However, it is important to keep in mind that though there can be many different taxes associated with estate administration, depending on where you live, how large the estate is, and who the estate’s beneficiaries are, you may not have to deal with any of them.
Check out our guide, What to do when someone dies, or feel free to call us to set up a free initial consultation on the first steps you can take after a friend or family member passes away.
Estate administrations take a long time for a number of reasons. Many times the length of time an estate administration takes is beyond the executor’s / personal representative’s / administrator’s control. Please see some of the following reasons for slowness and delays in estate administration, below:
Contrary to popular belief, when someone dies without a Will (also known as “dying intestate”), their estate must be administered and closed out. It is called an “intestate estate” and also still must go through a “probate” process in order for the next of kin to get appointed as the Administrator of that estate. Often, the courts must get more involved in the estate administration depending on where that person died and the property they owned/debts they have. Because there is no Will, once the proper expenses of the estate are paid off, the balance of the property in the estate is paid out according to the laws of the state where the person passed away. Usually, this means close family members (i.e. spouse and children) would receive the balance of the estate.
An Executor and a Personal Representative are the exact same thing, and are the person named in a person’s will to handle, manage and settle that person’s estate and are appointed by the probate court to do so after he/she dies. In some states like Maryland, Florida, Indiana, etc., they are referred to as “Personal Representatives” and in other states like New York, New Jersey, North Carolina, they are referred to as as “Executors.” Close relatives, friends, and advisors are usually selected to serve in this role.
Finding new property, assets or accounts that a deceased person owned well after the estate has been closed is unfortunately a problem that has become all too common. Often, though people will hire an attorney to help them administer the estate of a deceased loved one, that attorney is handling the legal matters within the estate and obtaining letters of administration for the client. They are not usually going out and helping the executor client discover all of the assets of the deceased person. This “asset discovery” phase in an estate administration can often be quite difficult for estate executors, personal representatives or administrators to handle, as people often don’t know where to look, let alone what to look for. When a new asset is discovered after an estate has been closed, in most cases the estate (and accompanying probate) needs to be reopened, managed, administered and closed out again. This can be very frustrating for everyone involved, from the estate executor, personal representative, administrator, trustee, to the legatees under a will and beneficiaries of the estate. Luckily, Trustate can help. No matter whether you are reopening an estate administration because of a newly found asset or administering an estate for the first time, we can help estate executors, personal representatives, and administrators find all of the assets owned by their deceased loved one.
Yes. It is a huge misconception that you do not need to administer your late spouse’s estate. In fact, not doing so can have dire consequences. Trustate recently wrote a case study on this exact topic, and how forgetting to administer a spouse’s estate and retitle everything can cause unnecessary stress and problems for those administering the surviving spouse’s estate when he or she passes away. Not to mention, depending on the net worth of the estate, it may also help to save money on estate taxes as there may need to be a “portability return” prepared and filed within a specific period of time from the date of the first spouse’s death.
A ladybird deed is a way to transfer real property (i.e. homes, land) to someone else when the owner dies through the deed of ownership on that property instead of through the probate process. In a way, it allows you to “name a beneficiary” of your real estate. Ladybird deeds are only permitted and legally enforceable in certain states (i.e. Florida).
If a person designates you to take care of all of their assets and expenses when they are alive, they do this through a Power of Attorney form and you are known as their “agent” or their “attorney-in-fact.” Upon the person’s death, this form is no longer valid and an Executor must be appointed to do these things on behalf of the person’s estate.