Welcome to Executive Benefit Plans, Inc.


Main Link Column
Select this link Retirement Plans
Select this link Strategies
Select this link Employee Benefits
Select this link Individual Benefits
Select this link Participant Info
Select this link White Papers
Select this link Consulting Service
Select this link Proposal Request
Select this link Administration
Select this link Contact
Select this link News
Select this link Blog
Select this link Home

Plan Insight

APRIL 2010 Newsletter

Probate: Mysteries and Realities

The idea of having your will or estate go through "probate" conjures up visions of money that should have gone to your heirs being peeled off and divided up for the state's administrative services in seeing to your last wishes. In addition, the process of probating a will or estate can be a lengthy one, particularly trying for a spouse or children who have to wait until it is finished to gain clear title to a home or access to bank accounts.

Consequently, attorneys and financial planners often encourage people to structure their estates in ways that will avoid probate. That may or may not be beneficial, given that probate court systems in many states have been restructured in recent years and there are only certain types of assets that aren't required to be probated.

What is probate and how does it work? There are actually two facets to the process commonly referred to as "probate". When a person dies, his/her will must go through a formal process of being finalized. The probate court, depending on the state, determines that the will is your last statement confirming the disposition of your estate and officially appoints the person or business that you have already chosen to administer the will (your executor). In cases where a person dies intestate (without a will), the state court may appoint an estate executor, generally an attorney or agency that specializes in such matters.

In addition to the formalities, the term probate is also applied to the whole process of gathering and paying any final bills and taxes that are filed against the estate, as well as distributing the remaining assets to the heirs. The executor is supervised, or at least reports to, the court, and may come under close scrutiny by the will's beneficiaries. Because the executor performs a number of tasks that can be technically difficult and time consuming, he/she is also entitled to be paid a reasonable amount for services rendered. The actual amount of compensation may be provided for in the will, or could be a percentage

established by the particular state's probate laws. In either case, it does constitute a certain portion of a person's net assets that subtracts from the amount eventually dispensed to the heir(s).

There are certain assets that are exempt from probate. Those include life insurance or retirement plans that pass to a specific, previously named beneficiary and real estate held jointly by the deceased and the beneficiary. In addition, bank accounts or brokerage accounts that are jointly held and which specify the right of survivorship do not have to be probated.

A living trust, which passes property to your heirs prior to your death is often marketed as a way to avoid probate. However, that assertion may not be entirely true. It is only rarely that some part of a living trust does not have to go through probate, despite the original intentions. Any property that has not been transferred to others prior to your death is generally willed to the trust itself, then transferred to the heirs via a trustee who very probably charges fees, after he or she pays any outstanding taxes from the estate. It is the very process of settling those same taxes and administrative details that can delay and extend the process of probate. Thus, depending on the state where the property is being dispersed and the extent of the estate, the actual time frame and cost of probate can potentially be less than those involved in the distribution of a living trust.

Probate, therefore, is generally a necessary court procedure through which a person's final will is confirmed and the proceeds from it are distributed. Because states have been working toward simplifying the procedures involved in probate, it is not something that must necessarily be avoided at all costs.

Retirement Plans

Select this link Consulting Services

Select this link Qualified Plans

   Select this link Savings Calculator

   Select this link  401k

   Select this link Safe Harbor 401k

   Select this link Roth 401k

   Select this link SIMPLE 401k

   Select this link Profit Sharing

   Select this link Money Purchase

   Select this link Defined Benefit

   Select this link Cash Balance

   Select this link Successor Plan Rule

   Select this link IRC 401(a)

   Select this link ERISA 404(c)

   Select this link Prohibitive Transactions

   Select this link Fiduciaries

   Select this link Contribution Limits

   Select this link Controlled Groups

Select this link Other Plans

   Select this link IRAs

   Select this link 419(e)

   Select this link SEPs

   Select this link SARSEPs

   Select this link SIMPLE IRA

Other Links

Select this link Tests

    Select this link ACP Test

    Select this link ADP Test

Select this link Restatements

Select this link Amendments

Select this link Mistakes

Select this link Catch-up

Select this link Funding Limits

Select this link EGTRRA Q&A

Select this link Conduit IRA

Select this link Pricing

Select this link Quote

Select this link White Papers

Select this link FAQs

Select this link Glossary



Information is provided for review and consideration only. Please consult legal and tax advisors for practical advice pertaining to your business and personal situations.

This page was last reviewed and/or updated on Friday, July 03, 2015 05:21 PM


Privacy Statement - Executive Benefit Plans, Inc. Copyright 1996 - 2015 All Rights Reserved - Legal Statement
Website Powered by UHSystems