FAQS: WILLS, PROBATE COSTS, POWER OF ATTORNEY & MORE

WHAT IF I DIE WITHOUT A WILL OR TRUST?

If you die without a will or trust, you die intestate, in that case, the state has provided a way to distribute your assets to your relatives: the court procedure of probate.

However, if you leave no instructions, your property may not be divided and transferred as you would have liked. The laws of intestacy and the probate process govern assets that do not pass directly to a named beneficiary (such as life insurance and retirement accounts), by joint tenancy or through a trust.

WHAT HAPPENS IN PROBATE?

Probate is a court-supervised process for distribution of property for a person who has died with or without a Will, or without a trust. If may take up to a year as the named executor (or court-appointed administrator) goes through these steps:

– notifying the heirs, beneficiaries and creditors
– gathering the assets
– paying taxes and debts
– distributing the balance of the estate to the beneficiaries

Probate fees are governed by statute. The executor and probate attorney will receive 4% of the first $100,000 of assets, plus 3% of the next $100,000, plus 2% of the next $800,000, and 1% of the next $9 million, and .5% of the next $15 million.

Small estates of less than $184,500 (in 2024) with no real estate can be settled in a simplified process.

WHAT IS ESTATE PLANNING?

Estate planning is the process of preparing legal documents that specify how you would like your money and property distributed upon your death, how you would like your healthcare decisions made if you cannot make them yourself and who would manage your finances if you become seriously ill or incapacitated.

WHAT IS AN ESTATE PLAN?

Estate plans normally consist of a will, durable power of attorney for assets, an advance healthcare directive, a trust and nomination of guardian for minor children. This coordinated plan gives you control of personal and financial affairs by laying out your decisions in advance and appointing people to enact those decisions. You will choose who will:

– manage your personal and financial affairs
– care for you in the event of incapacity
– receive your assets upon your death
– raise minor children if you die before they become adults
– manage your estate after you die if you choose to have assets remain in trust

WHAT IS A REVOCABLE LIVING TRUST?

To avoid probate fees and administration, some people opt to create a revocable living trust and retitle their assets in the name of the trust. In this case, the trustor can change any of the terms at any time before death.

If your assets are properly titled to your trust, a court-supervised probate proceeding is unnecessary, thus avoiding probate fees. If your estate is organized, trust administration is usually much less expensive and more streamlined than probate, leaving more for your chosen beneficiaries.

With a revocable living trust, you can designate a successor trustee to manage your finances if you become unable to do so during your lifetime. After your death, a successor trustee is responsible for settling your estate and distributing your assets as you have directed in the trust document, either all at once or in installments.

WHAT ABOUT FEDERAL ESTATE TAXES?

Having a properly funded trust avoids probate fees and can lower estate tax liability for a married couple. Federal estate taxes are assessed based on the fair market value of the estate at death.

While estate law had undergone significant changes in recent years, the current estate tax exemption amount in 2024 is $13,610,000 per person. That means a married couple, with good planning, can pass $27,220,000 of their estate to their beneficiaries without triggering federal estate tax. The estate tax rate for amounts over the limit is 40 percent.

The 2024 estate tax scheme will sunset on December 31, 2025 unless legislation is passed to change or update that law. If it is allowed to sunset, the per person estate tax exemption amount will revert to the prior limit of $5 million per person as adjusted for inflation.

WHAT IS AN ADVANCE HEALTH CARE DIRECTIVE?

In this document you name an agent to make health care decisions for you if you become unable to do so yourself. You can indicate the degree and types of medical interventions you would like to receive, your care preferences, and specify how you would like your remains handled on your death.

WHAT IS A DURABLE POWER OF ATTORNEY FOR ASSETS?

With this document, you nominate a person or persons to act on your behalf with respect to your money and property while you are alive, but unable to manage your assets yourself. You can make the agent’s power effective immediately, or only when you become incapacitated. You can also specify a particular time period, and what types of property are covered.

WHY NAME AND AGENT IN A POWER OF ATTORNEY DOCUMENT?

While you are alive a power of attorney allows you to authorize a specific agent or agents to act on your behalf – to pay bills, manage your pension benefits and other non-trust assets if you cannot yourself.

Without such an agent, if you were to become incapacitated by illness, accident or advanced age, you may need to be placed under a conservatorship. This process is a court process that can be time consuming and expensive. It is better to plan ahead by naming an agent to handle your finances in case you are unable to do so for yourself.

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