What Is Probate?
The probate or estate administration process is when someone dies owning assets in his or her name alone and an estate must be started by a personal representative to handle the decedent’s assets and settle his or her affairs. The personal representative is called an “Executor” if appointed in the decedent’s Will. If the decedent has not designated an Executor in a Will, the court appoints an “Administrator,” which can be an individual or corporation such as a bank or trust company. The
Executor or Administrator is the only person or entity legally authorized to deal with the assets of the estate and handle matters of estate administration.
Why Is There A Probate Process?
Probate is a process required by state law. The probate process in Pennsylvania is an efficient way to protect beneficiaries and creditors and to assure proper distribution of estate assets. Assets held in a trust are governed by the terms of the trust rather than the decedent’s Will and pass outside the probate process. But even if assets are not subject to probate, they may still be subject to all of the same death taxes as probate assets.
What Are The Costs Of Probate?
In Pennsylvania, the costs of probate include filing fees for opening the estate, advertising the estate, filing an inventory of estate assets and other papers to complete the administration process. Legal fees are paid to the attorney handling the estate work, which may include preparation of various death and income tax returns. Obtaining appropriate legal advice about the administration of the estate can help contain costs and taxes. Talk to your lawyer to find out whether services will be based on an hourly fee, a flat rate, or on a percentage of the estate assets and what would work best for you.
Is Probate A Lengthy Process?
In Pennsylvania, probate need not and normally does not take long in comparison with other states. Executors or Administrators are accorded broad powers to accomplish the administration of estates in a quick manner. They are empowered to handle most details without seeking court approval for each and every transaction, such as the liquidation of assets and the paying of debts and expenses.
What Is A Trust?
A trust is a legal entity to which your assets (bank accounts, securities, house, etc.) can be transferred for management by a Trustee. Trusts can be created while you are living to manage your assets while you are alive or to help your heirs manage their inheritance after your death. There are a number of types of trusts, each with its own set of benefits. As such, trusts can be complicated, so it is important that you contact a lawyer to make sure that you understand all of the issues about trusts.
One form of trust that has been aggressively marketed by some financial planners and lawyers is a “Living Trust.” Be aware that although a “Living Trust” could be right for you, you should review any trust with a lawyer experienced in estate planning before making a commitment. Trusts can ensure flexibility in your asset management and may have tax benefits, but you should be sure that you really need one and that it fits your needs.
What Are The Common Myths About “Living Trusts?”
“If I have a ‘Living Trust’” …
• I do not need a Will. False — even if a “Living Trust” is right for you, you still should have a Will. If some of your property is left out of the trust, or if any portion of the trust is invalid, a Will can ensure your assets are transferred consistent with your wishes.
• My estate will not pay attorney’s fees. False — because transferring assets under a “Living Trust” will require accumulating assets and distributing them (and since taxes may be due), it is usually necessary to hire a lawyer to help administer the “Living Trust” after death. In addition, there are legal fees associated with preparing the trust document.
• The assets will not be considered mine if I need to go to a nursing home. False — Because “Living Trusts” usually are revocable (meaning you can alter them during your lifetime), they will be considered your assets if you apply for nursing home benefits.
• My estate will not pay inheritance or estate taxes since my estate won’t need to “go through probate.” False— generally speaking, any transfer of assets as a result of death will result in inheritance and possibly estate taxes being due. Thus, in most cases, property passing by a “Living Trust” will be subject to tax. Certain trusts, referred to as irrevocable trusts, may have tax advantages that other trusts can’t provide.
• My assets automatically will be part of it and my Will will not have to be probated. False — Only property that you specifically list as part of the trust will be part of it. If you own property individually and don’t include it in the trust, your Will still must be probated.
“Living Trusts” – Unfortunately, some “Living Trusts” are marketed to senior citizens through high-pressure sales pitches that prey on the fear that assets will be tied up indefinitely or that estates are prone to heavy taxes and fees if a “Living Trust” is not in place. These marketing schemes try to convince consumers that a “Living Trust” is right for them even though many of the complex rules and fees that can complicate estate distribution do not exist in Pennsylvania. Victims can be sold self-help “kits,” costing several thousand dollars that are nothing more than standard forms that may not be valid under state law.
Why Shouldn’t I Do My Own Estate Planning?
Estate planning involves judgment and skills acquired only through professional training and experience. Standardized Wills and trusts, such those produced using kits or computer software may not be drafted to comply with Pennsylvania laws.