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October 2, 2018

Financial Freedom: Understanding Wills

Do you have a will, a living well, and/or a living trust? This may sound basic, but you would be surprised at how many are unprepared.

Preparing for the End

So, you work all of your life to build an estate for you and your family. When you die, you usually want your family to benefit, and not the government, and yet, so many people fail to plan for their demise, at the expense of their loved ones and heirs.

Here is a little Q and A on Wills and Probate. The next piece will be on living trusts (the probate costs are outdated but will give you an idea.

WILLS AND PROBATE: You should be doing what you can now to avoid the process, expense, and time of probate procedures.

1. What is Probate?

Probate is the court administered transfer of an individual's assets at their death and the payment of their creditors. This includes death taxes.

2. Who administers the Probate activities?

The court appoints an individual to execute and administer the probate activities. That person is given the title of "executor" if named in the Will (a testate estate) or "administrator" if no one is named in the Will (an intestate estate). Normally, the individual appointed by the court is the person named in the decedent's Will.

3. What is a Will?

A Will is the written request of the decedent regarding the administration and transfer of his or her property at death. If there are children under the age of 18, the Will may also request the appointment of an individual to be in charge of them and their property until they reach age 18.

4. What happens if a person dies and does not have a Will?

Laws of each state in the country set the rules for the distribution of assets when a person dies without a valid Will. This being the case, everyone has a Will, either their own version or their State's version.

5. Why does Probate appear to take a long period of time?

Each step of the Probate process must be completed before the Probate is closed. The principal Probate activities are:

A. Locating and determining ownership of the decedent's assets, including the opening of the decedent's safe deposit box and making and taking an inventory of its contents.

B. Determine all income earned, but not been received, by the decedent prior to death, including pensions and accrued interest.

C. Sell certain assets in order to:

(1) Pay the creditor.

(2) Pay estate taxes and income taxes.

(3) Complete contractual obligations, such as buy-sell agreements.

D. Prepare and submit the Federal estate tax return, and coordinate any Internal Revenue Service audit or examination of the return.

E. Coordinate and complete probate administration of assets held in other states.

F. Provide the required public announcements regarding the appointment of the executor/administrator, notices to creditors, and sale of assets.

6. Why do I need a Will?

A. Designate my own executor.

B. Ability to waive the requirement of having the executor purchase a bond.

C. Stipulate burial instructions.

D. Gather assets not already in a living trust and place them into that trust, if applicable.

7. What is the cost of probate?

Gross Value Estimated Probate and of Estate Administrative Expenses

$100,000 probate size equals $8,200 admin costs
$200,000 probate size equals $15,400 admin costs
$300,000 probate size equals $22,200 admin costs
$400,000 probate size equals $28,700 admin costs
$500,000 probate size equals $35,000 admin costs
$600,000 probate size equals $41,000 admin costs
$700,000 probate size equals $46,900 admin costs
$800,000 probate size equals $52,700 admin costs
$900,000 probate size equals $58,400 admin costs
$1,000,000 probate size equals $64,000 admin costs

8. What other ways can property be transferred at death?

Property can be transferred outside of probate in the following ways:

A. Joint tenancy ownership of property.

B. Life insurance with the beneficiary designated to be an individual.

C. Living Trusts.

D. Special bank accounts.

E. Community property ownership of property with one's spouse.
 

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