What is Probate?
Probate is a legal process whereby a deceased person’s assets are itemized, creditors are paid, and appropriate tax returns filed, and deliver whatever is due to the heirs.
If the deceased left a will, most of the time probate will be unnecessary. However, in the United States, if there is over $100,000 worth of assets probate may be necessary even if a will exists.
If the deceased had an IRA, mutual funds account, and life insurance, those are no probate assets. That is because these assets already have legally recognized named beneficiaries where the assets pass to them without the need for probate.
A home, bank savings and checking accounts are assets that may be probated. If the will does not specify who gets those assets or their total value exceeds $100,000; in many states probate will be necessary.
You can avoid probate by using offshore corporations with offshore bank accounts. The offshore corporations own all of the real estate, vehicles, jewellery, furniture, and other personal items. The shares of the offshore corporations can be held by a Private Interest Foundation for better anonymity and estate planning.
If you choose to rely on a will or die without a will (called “intestate”), not only could your estate be subject to probate in many states, but also your estate may end up costing your heirs additional fees. Here are a few ways your will could create problems and future expenses to your heirs:
Main Estate Planning Issues
No Control Over
Who Manages Your Asset Distribution
If you die intestate, fail to name an executor in your will, or the one named in your will is deceased or refuses to act as executor, a probate court must appoint an executor. That appointee must then determine who the heirs are and what distribution of the assets they are entitled. The executor will ask the probate court to deduct the fees and out of pocket costs at a price determined by the court from the assets.
Interim Estate Finances
The executor will be handling the estate’s finances prior to distribution. Real estate mortgages, negotiating with creditors, paying down debts, and paying income and property taxes will be extra duties for the executor. These can result in extra costs for the estate.
Wills leave out assets or are not amended when new assets are obtained before death. Probate may become necessary to sort out which heir gets what new asset. Getting divorced and remarried affects the heirs and their shares. These will incur additional expenses for the estate.
Dying intestate, leaving out assets in a will, or having someone challenge a will in probate court will incur additional legal fees for the estate. Some states allow probate lawyers to charge 5% of the total assets. Many times, assets must be sold before they should in order to pay the probate lawyers.
State and federal estate tax laws often change resulting in different taxes than originally anticipated when drafting a will. In 2006, the U.S. federal estate tax applied for estates valued at more than $2 million. When you add up the fair market value of a home, life insurance policies, stocks, other securities, vehicles, furniture, art work, jewellery, collectibles, business ownership, etc. could add up to more than $2 million. Going over that total amounts to federal estate taxes of up to 45%.
Government Grabs All
Dying intestate when the state cannot locate legitimate heirs forfeits everything to the state. This is called “escheated” to the state. Even if an heir is found, the costs incurred by the state in locating the heir are deducted from the estate.
Proper Estate Planning can avoid these potential problems discussed above.
That is why we recommend contacting Asset Protection attorneys qualified in planning your family’s future with worldwide asset protection and estate planning.