Filbrandt Reports

Your Estate Process: Open to the Public?

Volume 18, Issue 15

Executive Summary:

In this report, you will learn:

  • The steps involved in settling an estate
  • Differences that result from the use of a trust vs. only a will
  • How long estate settlement typically takes
  • Estate administration responsibilities of a trustee
  • Advantages of a private estate settlement process instead of a public one

You are certainly aware that wills and trusts are the primary documents you can use to create your estate plan. You may not be aware of how the estate settlement process differs between the two. This report is a guided tour through the process, containing important points that will impact your beneficiaries and loved ones.

Estates settled through wills are all controlled by probate courts, which are under the jurisdiction of each state’s set of laws. Because courts and court records are open to the public, probate is considered a public process. In general, avoiding probate ensures more privacy, costs less and is faster than estate settlement through probate. The clear way to do this is by creating a trust, which is private and avoids probate.

Are your assets correctly titled?

Using a trust versus a will as your primary instrument is not just a matter of what type of document is used. It is an issue of how your assets are titled at the time of death. Generally, wills handle assets in your individual name and trusts handle assets titled in the name of the trust.

A trust should be created and funded during life so it is already valid and operating. This enables the settlement of the estate to begin right away and without formalities required by probate laws like contacting beneficiaries. These steps in probate can slow down the process and cause unnecessary family friction when there are heirs who are not beneficiaries. In a trust, only the parties to the trust are notified and there is no public hearing.

The trustee – the person or entity that will administer the trust – must agree to the role. Effectively, it’s a nomination. Once the role is accepted, the trustee can immediately explain the document to the family and help them to understand the steps and timing of the estate settlement.

There is no set time frame, but assuming the trust terminates at death and distributes all assets, as in the case of a will, one can expect it will take at least six months and, depending on size and complexity, a year or two is not unusual.

Creating a full inventory of the assets is the first step. Next is identifying and getting the date of death values of every asset owned by the trust. Do you have a centralized, up-to-date list of account numbers and locations, or do you “just know”? Now imagine, if you are no longer with us, what someone walking into that situation would experience having to piece together the full picture. 

Family members often want to be helpful, but this can be a big job. Assets often include investment accounts, bank accounts, real estate, retirement plans (although they generally pass to a named beneficiary, likewise with life insurance and annuities), business ownership, even personal property, as well as debts and credit cards balances.

Your Estate Process: Open to the Public?

Trustee has a large job

The trustee must create a complete picture of the assets and liabilities of the deceased so that they can address the debts then figure out the net worth at death available to distribute after estate taxes are considered. The trustee must keep detailed records, provide statements to the beneficiaries.

Once the assets are gathered, the trustee must consider two forms of taxation. Every estate or trust is treated as a taxpayer, and so it must file an annual income tax return. In addition, the decedent would have at least their final income tax return to file for income earned until death. Tax professionals can be of great value here. Beneficiaries can choose whether or not to accept their inheritance. In some cases the beneficiary might disclaim their interest in favor of the next named beneficiary in the trust, often their children.

Imagine having to check in with the court every time you wanted to take another step in the administration. Professional trustees deal with these matters every day and have all of the systems and checklists in place to make sure things are done right and done efficiently. Anything not done correctly is the personal responsibility of the trustee.

Using a trust makes the process more efficient and more private. In summary, in settling an estate using a trust, the complexity of the assets and legal and tax compliance still exist, yet avoiding the direct court supervision and public scrutiny that can exist in the probate process of many states. Discuss with your adviser whether trust settlement may be right for you.

If you have questions about trusts, contact Filbrandt Private Trust, which is licensed in all 50 states to provide professional trust administration services. To learn more about how we can help, give us a call at 800-431-9740.

Volume 18, Issue 15

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