How To Minimize Probate Costs
by infocus on 2007-09-23
Most people think that dying is the easiest way out for someone who wants to be rid of the legal processes and the costs involved in such processes. They do not know that dying does not end the legal responsibilities of a person because the state still has control over his assets until it is legally turned over to his beneficiaries.
When a person dies, he either leaves a will or none at all. Also, even if there is a will, the assets of the dead person will not automatically be given to the heirs named in his will but it will have to pass probate or the legal process of making sure that his will is valid and legally conforms to the requirements of the law.
Probate is not an easy process and it requires an executor and an administrator who are either appointed by the testator or the person who died or, if the testator failed to name his chosen executor or administrator, then it is chosen by the state.
During the probate of a will, the administrator has to make an accounting of all the assets of the testator, pay his creditors and notify the heirs and all people who may have a concern in the disposition of the property of the testator.
Probate is a very complicated process and the beneficiaries sometimes wait for years before they can get the assets entrusted to them by the testator. Sometimes, all the assets have already been expended in advance for the payment of the administrator, the lawyers and the legal payments that only a meager part of the asset remains for the beneficiaries.
Since probate is a very expensive procedure, the testator should choose an executor who can be trusted to execute the will in the most efficient and cost effective manner. The executor should have knowledge on the probate laws and tax laws so he can choose the best possible option that would be favorable to the testator and his beneficiaries.
If the testator leaves behind a huge estate then most of the liquid assets will probably go into paying the estate taxes. Of course, there are ways to legally evade probate and estate taxes.
One option for the testator is to create a living trust arrangement whereby a trustee is chosen to take care of all the assets of the testator. A living trust is not only a way to avoid the payment of estate taxes but it is also a way to make sure that the assets of the testator are conserved and managed properly in favor of the beneficiaries.
Most often, beneficiaries of a will tend to spend all the money or sell the assets they have inherited the moment they get hold of such money or asset. A living trust arrangement will make it impossible for them to do this and will help them use the money wisely and for a long term period.
A living trust arrangement will also earn more income for the beneficiaries especially when the money or property has been invested properly. This way, the testator is still in control of how his assets are expended even if he is already dead.
The money used for funding a living trust agreement will not be included in the probate proceedings. As a result, the money will not be included in the tax and other legal requirements that have to be paid during probate proceedings.
Residents of Massachusetts need not worry about excessive cost for probate proceedings in the State but they have to contend with the long period required by the state law before the assets are distributed to the beneficiaries. A waiting period of one year is required by the law of Massachusetts before the assets are distributed to the heirs in order to protect the rights of the creditors of the testator or of his estate.
To avoid the long process, and in some States, the expensive probate proceedings, the testator should get proper advice on how to leave his assets to another person after his death without necessarily passing probate. A testator can minimize probate costs by getting a life insurance or a pension plan for his intended beneficiary as this process will no longer require probate proceeding before the money is given to the beneficiary.
Putting the testators money or assets in trust for the beneficiaries will not only exempted them from probate but will also be a mechanism to make sure the beneficiaries benefit from the property of the testator without having full control of them.
There are occasions when companies refuse to release pension plans or life insurance plans without proof of probate. When this happens, the beneficiaries should rely on decided cases where the highest court declared that probate is not necessary before such benefits are released.
When a person dies, he either leaves a will or none at all. Also, even if there is a will, the assets of the dead person will not automatically be given to the heirs named in his will but it will have to pass probate or the legal process of making sure that his will is valid and legally conforms to the requirements of the law.
Probate is not an easy process and it requires an executor and an administrator who are either appointed by the testator or the person who died or, if the testator failed to name his chosen executor or administrator, then it is chosen by the state.
During the probate of a will, the administrator has to make an accounting of all the assets of the testator, pay his creditors and notify the heirs and all people who may have a concern in the disposition of the property of the testator.
Probate is a very complicated process and the beneficiaries sometimes wait for years before they can get the assets entrusted to them by the testator. Sometimes, all the assets have already been expended in advance for the payment of the administrator, the lawyers and the legal payments that only a meager part of the asset remains for the beneficiaries.
Since probate is a very expensive procedure, the testator should choose an executor who can be trusted to execute the will in the most efficient and cost effective manner. The executor should have knowledge on the probate laws and tax laws so he can choose the best possible option that would be favorable to the testator and his beneficiaries.
If the testator leaves behind a huge estate then most of the liquid assets will probably go into paying the estate taxes. Of course, there are ways to legally evade probate and estate taxes.
One option for the testator is to create a living trust arrangement whereby a trustee is chosen to take care of all the assets of the testator. A living trust is not only a way to avoid the payment of estate taxes but it is also a way to make sure that the assets of the testator are conserved and managed properly in favor of the beneficiaries.
Most often, beneficiaries of a will tend to spend all the money or sell the assets they have inherited the moment they get hold of such money or asset. A living trust arrangement will make it impossible for them to do this and will help them use the money wisely and for a long term period.
A living trust arrangement will also earn more income for the beneficiaries especially when the money or property has been invested properly. This way, the testator is still in control of how his assets are expended even if he is already dead.
The money used for funding a living trust agreement will not be included in the probate proceedings. As a result, the money will not be included in the tax and other legal requirements that have to be paid during probate proceedings.
Residents of Massachusetts need not worry about excessive cost for probate proceedings in the State but they have to contend with the long period required by the state law before the assets are distributed to the beneficiaries. A waiting period of one year is required by the law of Massachusetts before the assets are distributed to the heirs in order to protect the rights of the creditors of the testator or of his estate.
To avoid the long process, and in some States, the expensive probate proceedings, the testator should get proper advice on how to leave his assets to another person after his death without necessarily passing probate. A testator can minimize probate costs by getting a life insurance or a pension plan for his intended beneficiary as this process will no longer require probate proceeding before the money is given to the beneficiary.
Putting the testators money or assets in trust for the beneficiaries will not only exempted them from probate but will also be a mechanism to make sure the beneficiaries benefit from the property of the testator without having full control of them.
There are occasions when companies refuse to release pension plans or life insurance plans without proof of probate. When this happens, the beneficiaries should rely on decided cases where the highest court declared that probate is not necessary before such benefits are released.
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