Planning for how your heirs and loved ones will inherit what you have built over a lifetime is a weighty and important topic.
If you die without a Will, most states in America have laws which explain how to distribute your assets. The law in your state considers you to have died "in testate" which is a fancy way of saying you didn't have a Will. Each states' laws differ on how a deceased's assets are distributed "in testate", but many state laws are very similar. It is typical of many state laws that estate assets are distributed in a successive fashion to the deceased person's heirs. Determining who is an heir of a person who died without a Will usually goes something like this: (1) children (2) grandchildren (3) nieces & nephews (4) the decedent's siblings (5) the decedent's parents, etc.
That is not a rule, but an example of how your estate will be distributed without proper planning.
Having a Will does not necessarily avoid probate. Probate is also not necessarily bad. The probate process was created so that the Court in the deceased's state, and county-of-death, can effectively administer the deceased's assets under the dictates of the Will. This can solve a lot of headaches for the personal representative or executor - especially when their is any kind of fighting among the deceased children and/or heirs. Sadly, fighting over the deceased's assets is more common than people often think. Having a Court look over this process can be a life-saver for the personal representative.
A deceased person often has assets in many different forms. Some of these assets will be found to be "probate assets" and some of them will be considered "non-probate assets" under the law of their state. It is important to differentiate between what is a "probate asset" and what is a "non-probate asset".
Probate assets are usually those assets which are owned by the deceased person in their name only. What does this mean? It means those assets which the Court can transfer, under the Will, in the probate process. Still confused? Here is an example: the decedent's home (or "real property") is a transferable asset which is subject to probate. Thus, it is a "probate asset".
What is a "non-probate asset"? A non-probate asset is any asset held by the deceased person hat can be transferred without going through the probate process. Non-probate assets can include: real estate held as a joint tenant with rights of survivorship, joint bank accounts, other joint accounts, pay-on-death (POD) accounts, a transfer-on-death (TOD) account, or property held within a Trust which was created by the deceased person prior to death.
If a Will or Trust is created, the deceased person will have appointed either a personal representative (under the Will) or a trustee (under the Trust) to administer the deceased's assets upon his or her death. The initial duty of the personal representative or trustee is to figure out how to lawfully deal with the assets. This is where an attorney comes into the picture. Hiring a good attorney is of the utmost importance in properly collecting and distributing a deceased person's assets upon death.
Next, the attorney and the personal representative of the deceased's person's estate must determine what kind of assets the deceased person had and whether those assets are "probate assets" or "non-probate assets". As was discussed above, there are specific kind of assets which must be discovered and sorted. It is often the personal representative's job to discover those assets, hunt them down, and report their existence to the attorney for review. The total amount of probate assets will provide the attorney and personal representative with a means to determine what approach must be taken to transfer the deceased person's property to his or her heirs. Furthermore, a second reason that this step must be taken is to determine whether the deceased person's estate will be required to file a federal estate tax return and the tax return of the deceased's particular state.
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