By: Layne Blasingim, CPA & Elaine Daugherty, CPA
What is it?
Probate is the formal legal process that recognizes a will (if one exists) and appoints a representative/administrator/executor to distribute assets to all intended beneficiaries and creditors. Some states require a “formal” probate where an estate is settled under the supervision of a court. “Formal” probate is normally required if the estate is “large” (definition varies from state to state) or if the estate has no named heirs. This may be a costly process with fees paid to attorneys, the court, and others.
The Use of Wills in Estate Planning
Wills are important estate planning tools. They can name heirs to avoid “formal” probate. In most states, if there is no will then a court-appointed administrator will be used to settle all claims made by creditors and then distribute any remaining assets to the heirs.
Wills should be clear as to “who gets what” and any other post-mortem instructions. In many states, if there are disputes among heirs, unclear post-mortem instructions pertaining to the estate’s assets, or there are other disputes between parties with interests in the estate then a “formal” probate must occur.
Simplify Probate Matters with Living Trusts
For “large” estates it may be wise to set up a revocable living trust. A living trust functions like a will, but rather than going through a probate process your assets can be easily transferred to your heirs. You may essentially put any of your assets in a living trust, and upon your death the assets can be distributed how and when you wish.
Living trusts are especially useful if you wish to distribute money to heirs over a long period of time. This could be useful in ensuring that your descendants are taken care of after you die. You may also want to include a spendthrift clause in your living trust agreement if you think someone may not use their inheritance wisely. Spendthrift clauses use a trustee to distribute money to beneficiaries of the trust over time. This insulates any money in the trust from being claimed by the descendants’ creditors until it is distributed and can help ensure that your descendants will be taken care of after you pass.
If you have any questions you would like to have answered about this topic, please reach out to Elaine Dougherty, CPA in our Morgantown office at 304-554-3371. You may also email Elaine at edougherty@suttlecpas.com.
Please note that information and guidance on Estate Planning are situational. The information provided in this article is current as of the date of the article. It is intended for general informational purposes only. Consult with your financial or tax advisor about your specific situation.