A recent Kiplinger's Personal Finance article, titled "Forces That Affect Your Estate Plan," explored challenges you really need to address now so your estate plan will be effective later.
Probate is the way state courts validate the authenticity of a last will and testament. Once okayed by the probate court, the executor is allowed to collect and pay debts, pay taxes, sell property, distribute funds and carry out other tasks that go along with settling an estate. The probate process can be notoriously slow and expensive. Probate fees can suck up 3-7% of the estate's assets, and if someone contests the will, the legal bills can really increase.
Because of the years of dissatisfaction with this system throughout the country, many states have gone to a more streamlined procedure for small estates with informal procedures that need very little court supervision. Formal probate, with strict court supervision, is generally only used with large estates.
Joint ownership is a way to own property with another (usually a spouse) jointly with a right of survivorship. The property automatically passes to the other owner when one dies. This all occurs without going through the probate process. Tenancy by the entirety is another form of joint ownership, can apply only to married couples and is recognized in many states. Note: without further planning arrangements, however, even jointly-owned assets are subject to probate when there is no longer a “surviving” owner.
Federal estate and gift taxes might be categorized as "much ado about nothing." Despite all the publicity and earnings from the IRS, fewer and fewer estates will need to be concerned with it. The first $5.34 million of an estate is tax-free (twice that for married couples) in 2014; only taxable estates larger than these amounts need worry about paying the flat rate tax of 40%.
If you are in the neighborhood of the amount of wealth which may approach or surpass the taxable level, many planning techniques are available to minimize or completely avoid the estate tax that is otherwise due. A careful examination of your priorities wishes and desires should be made to identify the desired tax savings and also help you acheive your other nontax wishes or objectives. We can help you and your family acheive these enlighted dreams. Call us today (916) 440-8036.
Reference: Kiplinger's Personal Finance (January 2014) "Forces That Affect Your Estate Plan"