An estate plan consists of several parts and considerations, including a living trust. A living trust is a legal arrangement set up during a person’s lifetime that places their assets into a trust overseen by a trustee. The living trust also determines how the trustor’s assets will be distributed once they pass or become incapacitated. Some factors that may cause someone to create a trust range from tax benefits and avoiding probate to caring for family members with special needs. See how working with an estate planning attorney to create a living trust will help your family.
Avoiding probate is the most common reason for seeking out a living trust. Probate is the courts’ process of proving a will is accepted as a valid document that can be used to effectively distribute assets. There are several reasons in which you would want to avoid probate. The first is that probate can be a costly way to transfer your assets upon death. There are multiple parties that may need to be paid out during a probate proceeding, including the court, which add up quickly.
Probate is also a very lengthy process. It can take six to nine months (sometimes longer) to fully go through probate. There are many factors, documents, and people involved in the probate process, so it’s easy for complications to arise. Problems such as a contested will or an inability to find clear records of all of the deceased's assets and debts can extend this timeline.
Lastly, your probate proceedings will be publicly recorded for the court, meaning your case will become public knowledge and will be available to anyone. This significantly limits you and your family’s privacy which is not ideal during a family member's death.
A living trust provides tax savings to those estates that are subject to estate or gift taxes. There are many types of trusts to choose from, but the most common are irrevocable trusts and revocable trusts. A revocable living trust allows you to make amendments and changes to the documents as necessary, even during the trustor’s life. An irrevocable trust cannot be amended after the document has been signed, but it does offer significant transfer tax benefits that are not subject to the typical gift tax requirements. When you work with us, we'll make sure to align the type of trust with your family's tax-saving needs and other goals.
When it comes to your trust, it’s important for you to understand that a trust only controls assets that are put, or funded, into the trust. Living trusts need to be continually updated to accommodate changes such as marriage, childbirth, home purchases, and tax laws that could affect the trust. With a living trust, the trustor is able to amend the document to reflect their wishes. Because of this, it’s crucial that you work closely with your estate planning attorney to make sure your assets are properly aligned with your trust. This will not only help you get organized, but it will also make things easier for your heirs when you pass away.
Call our office at (775) 823-9455 or visit us online at wealth-counselors.com to schedule a complimentary consultation.
Probate is the legal process of estate administration. We practice law in Nevada, and in our state, the probate court in the county that the decedent resided in would supervise the process.
In this blog post, we will provide some answers to frequently asked questions about probate.
In an estate planning context, probate exists to provide supervision when an estate is being administered. If the last will is used as a vehicle of asset transfer, an executor would be named to administer the estate. The will would be admitted to probate, and the administration process would get underway.
The court is involved to protect interested parties. To explain by way of example, let’s assume that a friend borrowed $100,000 from you. Unfortunately, he passes away in a car accident before he could pay you. His family does not know about this debt, and they don’t particularly like you.
If there was no supervision, they could just distribute the resources that are contained in your friend’s estate and leave you out in the cold. Probate exists to give creditors a chance to come forward seeking satisfaction. The executor is required to notify creditors about the passing of the decedent.
Another form of protection that is provided by probate is the ability to challenge the validity of a will. There are some instances where challenges are very legitimate, and there would be no window of opportunity if the probate process was not in place.
Intestacy is another situation that can enter the picture when someone passes away without a last will or any other estate planning document. Under these circumstances, the probate court would take control of the situation, and ultimately, the assets in the estate would be distributed under intestate laws of succession.
There are certain types of postmortem asset transfers that are not subject to the probate process. If you have life insurance, the company would deliver the proceeds to the beneficiary directly. The court would have no involvement. This is also true if you have named a beneficiary to assume ownership of the remainder that is left in your individual retirement account after your passing. When you open a bank account, you have the option of adding a beneficiary. This is called a transfer on death or payable on death account. Brokerage accounts also offer this option. When you have this type of account, the beneficiary cannot access the funds while you are alive.
For payable on death accounts, the beneficiary would obtain a death certificate. It would be presented to the bank or brokerage, and the beneficiary would assume ownership of the assets. The court would not be involved.
It is possible to add someone to the title or deed of your home as a co-owner. This is called joint tenancy, and it comes with right of survivorship. If you do this, the person that you add as a joint tenant would become the sole owner of the home after you die. This transfer would not be subject to the probate process.
A revocable living trust is another estate planning tool that is very useful, and it is a good alternative to a last will. You can consolidate assets with this type of trust, and you can instruct the trustee to distribute assets over an extended period of time if you choose to do so. It is also possible to name someone to manage the assets in the trust if you ever become incapacitated.
In addition to these benefits, assets in a living trust can be distributed to the beneficiaries outside of probate. The same thing is true with assets that are in some other type of trust.
There are some drawbacks that go along with the process. It will take close to a year to run its course, and the inheritors do not receive their inheritances during this interim. There are expenses that reduce the amount of the inheritances that will be received, and it is an open proceeding, so privacy is lost.
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Q: What is Probate?
A: Probate is designed to create a “final accounting” upon death. It is the legal process of “proving up” a Will, or verifying that a Will is valid, takes place in one of two instances. First, if a person dies leaving behind a Will, or second, if the deceased has died intestate, that is, has not left behind a Will or estate plan of any type or the Will cannot be found.
Q: Does the Probate process take a long time?
A: Depending on the complexity of the estate and the thoroughness with which accounting has been carried out before death, probate can either be a relatively simple task or a daunting one. Be aware that no matter the situation, probate may be a lengthy process often taking months or possibly years to play out, and one which may take a considerable amount of an executor’s time.
To summarize the process, probate can be broken into six basic steps:
Each of these steps involve legal documentation and validation, and more importantly, proper accounting each step of the way.
Q : What is Probate Court?
A: Probate begins and ends with the special Probate Court set up in each state to handle estate issues. (Sometimes known as the Orphan’s or Chancery Court in certain states.) All actions taken regarding the estate are accountable to this court, and must be noted and reported regularly. This court is staffed by special judges qualified to oversee estate resolution issues.
Q: Does the Trust Administration process take a long time?
A: To summarize the process, trust administration can be broken into five basic steps:
Although the trust administration process seems relatively straightforward, there are several reasons it can sometimes be drawn out over several months or even years. The first step, the inventory of assets, must be completed before the trust administration can begin, and this can be difficult to complete depending upon the prior organization and the size and complexity of the decedent’s assets. Next, the 706 estate tax return must be filed within 9 months, or 15 months if an extension is filed. Often, it is prudent to wait until the last minute to file this form. If the spouse of the decedent is in failing health and may pass away before the deadline, then both 706 forms can be used to maximize tax advantages to the estate. The final step, asset distribution, cannot take place until the 706 has been filed, and even then should not take place until the “Closing Letter” is received from the IRS certifying acceptance of the 706 return. This closing letter will take a minimum of 6 to 8 months, and as long as 3 years, to arrive after the 706 is filed. In addition, there may be a state estate or inheritance tax return required, even if a federal return is not required.
Q: I thought that a living trust avoids probate and attorney fees. Why do I have to pay more fees?
A: While having a living trust can significantly reduce costs compared to probate, there is still a considerable amount of work to be done in properly administering even a simple living trust. The services of an attorney are required, and that person or firm should be compensated fairly for their services. It is important to remember that the fees allowed for trust administration are usually much lower than those for probate, and there is generally less work involved, as there is less involvement of the courts and state bureaucracy.
Q: Can I pick and choose what assets go into the “B” trust?
A: The answer depends upon the language of the trust document. Certain trusts include “pick and choose” language that allows trustees to selectively place assets into the “B” trust.
Q: How do I transfer the car(s) into my name?A: If you are a relative of the deceased, this is simple in most states. To transfer the title of vehicles owned by the deceased, simply take the death certificate to the DMV, and perform the transfer, paying whatever fees they require. If not a relative, bringing along the will and or any trust documents indicating your status should be sufficient.
Q: What do I do about Social Security?
A: Social Security will continue to send out benefit checks until they are notified of an individual’s death. The executor/spouse/trustee should contact the local Social Security Administration office and notify them of the death, or if a benefit check is received, send it back with a letter notifying them. This is important. If checks continue to be deposited, the recipient can incur liability later when Social Security learns of the recipient’s death.
The last will is a document that most people are familiar with and is the most common estate planning tool. In fact, many movies have romanticized the proverbial "reading" of the last will of a deceased family member. We can all imagine a family gathered in a lawyers office as the will is read, letting each person know what they received, or did not receive, from the estate.
Most people know that there are other legal instruments that can be utilized. But a lot of them are under the impression that only people of extraordinary wealth need to step outside of the tried-and-true last will as a primary vehicle of asset transfer.
In reality, people of ordinary means may want to consider alternatives to a last will when they are making plans for the future. There are a number of reasons for this, but the most compelling one is the fact that your estate must be probated if you use a last will.
The process of probate can slow things down considerably. During this interim the probate court examines the will in an effort to determine whether or not it is valid. So, at this time interested parties who may not agree with the contents of the will could step forward and present challenges. This can result in a long and drawn out legal struggle. Just think back to the case of Anna Nicole Smith. That battle was just resolved last summer some 15 years after it began.
Probate is also a source of asset erosion. There are costs that the estate will incur while it is being probated. Depending on the size of the estate, the nature of the assets contained therein, and whether or not there are any challenges costs could reach 4-8% of the total value of the estate and in some cases even more.
Most people are not going to be fully informed when they start making plans for the future. The worst way to plan is to rely on Hollywood's representation of what an estate plan should look like. The best way to gain an understanding of how to proceed given the unique nature of your circumstances is to consult with an experienced, savvy estate planning attorney.
Before we take a look at a couple of simple probate avoidance tools, let's examine the reasons why people avoid probate in the first place. For one thing, probate can be quite time-consuming. Depending on the complexity of the estate and whether or not the will is being challenged it can take anywhere from 6-9 months to even multiple years in complicated cases. In addition to the time involved, probate can be expensive, consuming up to 5% of your estate, in addition to extraordinary costs, again depending on the complexity of the matter and the size and scope of your assets.
So if you want to save time and money you may want to arrange for the transfer of assets outside of probate. One way to do this is through the creation of pay on death accounts. You simply open the account at a bank or financial institution of your choosing and name a beneficiary. Should you pass away, your beneficiary would assume ownership of the funds in the account, and this transfer would take place outside of probate. It's as simple as that.
In some states, including Nevada, you can execute a deed conveying your real proeprty to a beneficiary upon your death. Even though the deed is recorded while your are alive the conveyance does not occur until after your death.
Another way to transfer assets to your loved ones outside of probate is to give tax-free gifts. You can give up to $13,000 to an unlimited number of recipients each year free of the gift tax, in essence giving loved ones a part of their inheritance while you are still alive and before probate would be a factor. Other tax free gifts can be made.
And finally, purchasing life insurance is also a very simple but effective and efficient way to provide inheritances to your family members outside of the process of probate.
These ideas are something to keep in mind as you are contemplating your legacy. But in the end, the best way to implement a comprehensive probate avoidance strategy is with the assistance of an experienced estate planning attorney who will recommend the ideal combination of estate planning tools given the unique nature of your situation.
There are many "tools" to choose from when establishing your estate plan. One traditional option is the Will. If you research information about Wills you will find Internet marketing sites that will sell you a "one-size-fits-all" template. To hear them tell it, drawing up a Will is a simple matter but there's more to it than meets the eye.
If you pass away leaving a Will as your estate plan your estate will pass through a probate procedure. The probate court will examine your Will to ensure its validity and proper execution. During this process interested parties will have an opportunity to contest your Will. In this case the Court would schedule a hearing to review the matter. Obviously, when you're planning your estate you don't want your will to be contested; you want your wishes to be carried out to the letter.
Each state has different laws surrounding the formalities of drafting and executing a Will and the process of probate. If you were to use some sort of general template as a Will there is no telling whether or not it will wind up being ironclad once it is probated in the State Court. Reno probate lawyers make a career out of working with the probate courts in northern Nevada, and we understand exactly how to construct documents that are specifically targeted for the local Court. Providing for your loved ones after you pass away is a serious matter that requires a an experienced estate planning attorney.
Probate is a legal process wherein a court oversees the distribution of a deceased person's estate to the heirs or beneficiaries of the estate after the payment of all debts, obligations and funeral expenses. A Nevada probate proceeding helps fulfill the wishes of the deceased as specified in a will. In case there is no will, the distribution of the deceased’s estate is made according to the applicable state laws.
The time required to complete the probate process depends on several factors including:
With the above factors in mind, the probate process may be completed in nine to twelve months or may take years. The probate process can be delayed if the validity of the will is contested, if there are disputes relating to the settlement of the debt of the deceased, or if there is a delay in finding beneficiaries. Tax issues can also delay a probate process.
The cost of the Nevada probate process may be set by the applicable state laws or by practice and therefore differs from state to state and case to case. The general costs included are:
Although some of these charges are fixed per state law, legal and accounting fees can be negotiated. However, in case of any type of disputes or litigation, the probate process may continue for months, if not years, and involve a number of additional costs.
To learn more about probate and Nevada probate laws, speak with a probate attorney at Anderson, Dorn & Rader. Our Reno law firm also provides free reports that further explain a probate.
With a Roth IRA, your contributions (and the interest they earn) can be withdrawn tax-free. While this tax benefit may be the most significant aspect it offers a few more perks as well.
For starters, the Roth IRA is a contact that directs the payment of the balance of the account at your death to your designated beneficiary. So any funds that remain in the account when you die can be passed to your designated beneficiary without probate. But unlike other retirement plans, it doesn’t require you to begin withdrawing money at age 70 ½.
With a traditional IRA, for example, you must make minimum withdrawals beginning at age 70 ½. This amount will vary depending upon your age and the age of your designated beneficiary. The reason for this requirement is to ensure that you – not your beneficiary – receives the bulk of the funds in your IRA before you pass on.
A Roth IRA, however, doesn’t require you to withdraw any funds. So, unless you need the money, you can just leave it in account where it will continue to grow. Upon your death, all the funds will pass to your beneficiary, income tax-free.
To learn about more ways to avoid probate, contact the Reno, NV probate lawyers at Anderson, Dorn & Rader, Ltd. today!
While a living trust and living will may sound similar they are actually two quite different things.
A living trust is designed to help protect and distribute your assets. The assets are actually titled in the name of the trust and depending upon the terms of your trust, you may have complete control or hand the management of the trust over to someone else. Upon your death, beneficiaries receive the assets according to your terms in the trust. A method of avoiding probate, it’s a way of bypassing the lengthy and often expensive court process of distributing your assets.
A living will, however, is a legal way of informing your physician what you want done in case of a terminal condition. It’s used when you can no longer communicate your wishes due to an injury or illness that leaves you incapacitated. Your living will should be accompanied by a health care power of attorney. This document designates a person to speak on your behalf and relay your wishes with regard to certain medical treatments and decisions. It might relate to resuscitation, feeding tubes, etc. These "advance directives" also give loved ones peace of mind knowing that they are doing what you would have wanted.
It’s highly recommended that everyone draw up advance directives including a living will and a health care power of attorney, whereas a living trust is especially beneficial for those with a certain level of assets. To get help with a living will or living trust, a good estate planning attorney is your best bet.
