You should see the complete picture when you are devising your estate plan. Clearly, you have to state your wishes with regard to the way you want your assets to be distributed. At the same time, you should also consider the actions that must be taken to bring these wishes to fruition.
With this in mind, we will provide an overview of the estate administration process in this post.
Simple Wills and the Probate Process
If you use a will to direct postmortem asset transfers, you would name an executor in the document to act as the estate administrator. After your passing, the executor would not be able to conduct the business of the estate without court supervision.
The will would be admitted to probate, and the court would preside over the process. Final debts must be paid during probate, so the executor has to publish a notice to creditors.
A Tax Identification Number will be obtained by the executor from the IRS, and they would open an estate bank account. Legitimate debts would be paid, and the executor would identify, inventory, and prepare the assets for distribution to the heirs.
There is a proving of the will during probate. The court examines the will to determine its validity. If anyone wants to challenge the will, they can make a case while the estate is open.
After everything is in order to the court’s satisfaction, the estate will be closed, and the assets will be distributed to the heirs.
Probate Drawbacks
This sounds fair enough, but there are drawbacks that negatively impact the heirs to the estate. The process will typically take eight months to a year, and no inheritances are distributed while the estate is being probated by the court.
Probate is a public proceeding, so interested parties that want to find out the details can access the records. A loss of privacy is never a good thing, and this information can potentially cause hard feelings among interested parties.
There are expenses that pile up, including a filing fee, the executor’s payment, appraisal and liquidation charges, and in many cases, attorney and accounting fees. The red ink reduces the value of the estate before it is distributed to the heirs.
Living Trust Administration
The alternative to a will is a trust, and there are multiple different types of trusts. We are going to focus on the revocable living trust here, because it is the trust that is most commonly utilized.
One of the nice things about a living trust is the ongoing control. When you establish the trust, you act as the trustee and the beneficiary while you are alive. As a result, you have complete access to all the resources that you signed over to the trust.
In the trust declaration, you name a trustee to succeed you. This can be someone that you know personally, but many people use a professional fiduciary. Trust companies and the trust departments of banks provide this service for a fee.
After your passing, the trustee will distribute the assets to the beneficiaries in accordance with your wishes. The probate court would not be involved, so the negatives that we looked at would be avoided.
This is one of the benefits that living trusts provide, but there are many others, and we will look at them in a future post.
Attend a Free Seminar!
Since you are here on our website, you must be looking for information about estate planning. We have many blog entries for you to explore, and there are other written resources that you can access free of charge.
In addition to these materials, we offer estate planning and nursing home asset protection seminars on an ongoing basis. You can obtain a great deal of information in an efficient and convenient manner if you join us for one of these events, and they are free.
To see the schedule, visit our Oklahoma City estate planning seminar page. When you identify the session you would like to attend, follow the simple instructions to reserve your spot.
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