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ESTATE PLANNING BASICS
ESTATE PLANNING means, simply, anticipating that you will die, and doing more than nothing to plan an orderly transfer of your assets to your intended beneficiaries. The simplest of estate planning is to write and keep a Last Will and Testament. Depending upon the unique needs of the individual, estate planning may take the additional forms of a Revocable Living Trust, Advanced Tax Planning, Gift Giving, and numerous other vehicles for avoiding costs, taxes and headaches of estate administration.

When you die, your assets are transferred to your beneficiaries in essentially three different ways.

First is property owned by you in your own name, i.e., a bank account or house in your name. This property will pass either (i) to your beneficiaries through a Will, or (ii) to your natural heirs if you do not have a Will. If you do not have a Will, your property passes according to the laws of "Intestacy", in other words according to the laws of intestate (Latin for "without a will") succession of your state. If you have a Will, you are deemed to have died "testate", i.e., with a will.

Second is property owned by you in your own name, but either owned in joint tenancy, or having a "beneficiary designation". Joint tenancy property is typical where a husband and wife own their home in joint tenancy. Upon your death, this property passes directly to the surviving joint tenant by what is called "right of survivorship". Property with a beneficiary designation could be an IRA, pension or life insurance plan with a named beneficiary. At your death this property passes directly to the surviving beneficiary, and is not a part of your probate estate. Property held in joint tenancy or with a beneficiary designation is said to "pass outside of probate".

Third is property owned in the name of a separate legal entity, such as a trust. Although you set up a trust and, during your lifetime have full power to modify or even revoke the trust, upon your death the assets are deemed owned not by you but by the Trust. Thus, at your death these assets are not probated, but pass according to the terms of the trust.

Only those assets owned by you in your own name, not in joint tenancy, in trust, or with a beneficiary designation, are subject to probate administration upon your death. Although this sounds like a small slice of the pie, in reality most persons own their assets in their own name at death. For purpose of this discussion, we shall call these assets "probate assets".

Again, if you have no Will upon your death, your probate assets pass in accordance with the laws of your State. Although state laws differ, in general the laws of intestacy divide your separate property as follows. If you are survived by:
    Spouse and no children: all to your spouse
    Spouse and one child: 1/2 to child, 1/2 to spouse
    Spouse and more than one child:2/3 to children, 1/3 to spouse.
    No spouse and children: all to child(ren) equally
If you have an Will, your probate assets will be distributed, after payment of your debts, as set forth in your Will.

Most states also have a summary procedure whereby probate is avoided if the assets are below a certain value, or if the only heir or beneficiary is the spouse of decedent. For example, in California, if the assets of Decedent are valued less than $100,000 (property held in joint tenancy or with a beneficiary designation is not counted toward this $100,000, and no more than $10,000 of this $100,000 can be held in real estate), probate can be avoided entirely.

Whether Decedent dies testate (with a Will) or intestate (without a Will), if PROBATE is required, the following steps are usually followed:

    1. The original of the Will is deposited with the Court (if any).
    2. The EXECUTOR named in the Will (if there is one) or a person entitled to be the ADMINISTRATOR (if no Will) files a Petition for Probate of the Estate. Prior to being appointed Executor or Administrator (commonly collectively referred to as the "Personal Representative"), the filing of the Petition for Probate needs to be published in a local newspaper.
    3. Generally, for a period of four months from the date of publication of the Petition for Probate, creditors of the Estate can file claims against the Estate. This would include any prior creditors or judgment holders, debts resulting from last illness, funeral expenses, taxing authorities, etc.
    4. During this time period, the Personal Representative ("P.R.") has a duty to identify and collect assets of the Estate. In this regard, the P.R. finds all bank and security accounts, debts owed to Decedent, property owned by Decedent, and the like. The P.R. also has a duty to maintain the assets in good condition, and to collect income for the Estate. This consists of maintaining insurance coverage, protecting assets from waste and theft and damage, collecting rents, etc. The P.R. may also sell (liquidate) assets such as cars, residences, etc.
    5. When the four month Claims period has expired, and when all assets have been collected, real property sold, and assuming no problems have cropped up such as a legal fight amongst the beneficiaries or heirs, the P.R. then files a petition with the probate court to allow a distribution of all remaining assets to the beneficiaries/heirs, and files a detailed accounting with the Court setting forth all monies received, monies disbursed, how assets were invested, and the proposed plan for distribution.
    6. If the Court approves the P.R.'s plan, the P.R. then divides the assets as set forth in the Will, or if no Will, as required by statute.

The probate process outlined above describes the general probate requirements in outline form only. Obviously, there are many very technical and specific procedures in the probate process required to carry out these steps. As a result, in many states probate law is specialized to the degree that most attorneys will not handle probate matters, but refer them to probate specialists.

The probate process could be completed in a minimum of about 6 months, but usually takes longer. Some reasons for delays are: will contests; property cannot be sold; the probate attorney is inexperienced in probate and requires repeated continuances of required hearings; some claimants were not notified in the original four month period and must be re-noticed; the probate attorney is busy.

Unless waived by the P.R., usually both the P.R. and the attorney for the P.R. (the probate attorney) are entitled to compensation for their services.

Using a Revocable Living Trust, the time and costs involved with probate are substantially reduced. With a single Grantor Trust, attorney help following the death of the Grantor is usually not necessary, and the collection of estate assets, and distribution to the trust beneficiaries can be handled by the Successor Trustee, maybe with the help of an accountant. With a dual Grantor Trust (Husband and Wife being the Grantors), either an attorney or an accountant should be consulted after the death of the first Grantor so that the Trust is properly divided into the Decedent's Trust and the Survivor's Trust. However, the extensive court supervised administration prevalent in probate administration is not needed, thus attorney's fees as well as time required for administration are substantially reduced.
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