Probate is a process (court-supervised) of proving, registering and gathering a deceased’s personal asset, distributing them to the inheritors and sometimes creditor. Basically, when a person dies, the inheritor has to deal with the remaining estate of the deceased. However, the inheritor must prove in court that the will is valid.
One must keep in mind, though that probate process is a long, costly, grueling process that in some cases the overall cost of the probate is also equal to the value of the property or estate you are claiming. In an article published in Fidelity, probate for inheritances can be very costly in both time and money. Read the article below to learn more.
Probate for Inheritances
Probate can be costly in terms of time and money but it may be a necessary step before assets can be transferred to beneficiaries.
Probate is a legal process for settling an estate according to the will of the deceased. The deceased’s taxable estate is made up of all of the assets in which he or she holds an interest at the time of death, but only assets held individually in his or her name will generally have to go through probate.
The probate process varies by state—many states offer a quicker, less expensive option if the assets subject to probate are below a certain value (for example, $25,000 or $50,000).
Probate is also public record, so it decreases the level of privacy of the estate.
Some assets, such as investment accounts with transfer on death (TOD) designations and retirement accounts, allow for the naming of beneficiaries and, therefore, may transfer to beneficiaries without going through the probate process.
Assets with joint ownership with right of survivorship pass to the second owner when the first owner dies. If there is a TOD on the account, the assets will only go to the beneficiary if both joint owners pass away. In either case, the asset will not likely go through probate.
When someone passes away without a will or intestate, assets pass to heirs at law via the probate process according to state intestacy laws.
There may not be much you can do to avoid going through probate once a loved one has passed away, but it helps to understand the process as you work with an attorney or tax advisor.
Which assets pass through probate
Generally speaking, any asset that allows the owner to name a beneficiary will not have to go through probate, including most assets once they are placed in trusts. The following table gives a general idea of which assets are and are not usually subject to probate in the most common scenarios. Click here to read the rest of this post…
As mentioned above, probate is a costly process that consumes too much of your time and money, but there’s not much you can do since it is a very important process in order for inheritance to be transferred to the beneficiary. While it’s true that it is a costly process, there are certain ways you can do to at least minimize the cost of the probate process.
Tim Cestnick of The Globe and Mail wrote a very informative article on how to minimize probate fees until such time you completely recover the inheritance of deceased relative.
Where There’s a Will: How to Minimize Probate Fees
My son, Win, thought he would educate me on some facts about human mortality this week. He shared with me that spontaneous human combustion is most likely to happen during periods of strong magnetic disturbance. Supposedly, it’s possible for a person to seemingly ignite without any external fuel, and that most victims that have been discovered were wearing slippers at the time (it then occurred to me that the kids haven’t spoken to Grandpa in a while).
I have no idea whether Win’s information is accurate, but I did start thinking about my own mortality. I put away my slippers, and started contemplating the taxes that might arise at the time of my death. Specifically, I was thinking about one particular tax that many people overlook: Probate fees.
At the time of your death there is generally a requirement that your last will and testament be legally approved by the courts under the laws of your province or territory. The probate process also confirms the appointment of your executor, and each province specifies what documentation is required as part of the probate process.
Not all wills have to go through the probate process (this will depend on the nature of the assets, among other things), but as a practical matter, most estates end up going through this process, and until this process is complete, it may not be possible for the executor to manage or distribute the assets of the estate.
Most provinces charge a fee for probating a deceased’s will – and make no mistake, this is a type of tax. The fees can be as high as approximately 1.5 per cent in Ontario, to no fees in Quebec (for notarial wills).
There are a number of ways to minimize probate fees. Let me say, first, that it may not always make sense to make significant efforts to avoid probate fees. It’s a cost-benefit question. Take the time to understand what your probates would look like if you died tomorrow, and then determine whether any of the following ideas might make sense for you. Consider these strategies:
1. Designate beneficiaries
You’ll avoid probate fees on your registered retirement savings plan (RRSP) and registered retirement income fund (RRIF) assets if you designate beneficiaries under those plans. Likewise, the death benefits of any insurance policies on your life will sidestep probate fees if you name beneficiaries under those policies. By designating beneficiaries (other than your estate), these assets fall outside of your estate and pass directly to the named beneficiaries.
It was good news to hear that there are a couple of ways to completely minimize the probate fees, making a significant effort to lessen, even completely avoid these huge fees. Practically speaking, designating beneficiaries on your property while you’re still alive will completely negate the probate process. Here’s another awesome article was written by Patrick Collinson in The Guardian on how to avoid rip-off in claiming your loved one’s estate.
Probate: Avoid a Final Rip-Off When Sorting Out Your Loved One’s Estate
Outside executors can cream off thousands – don’t make an already testing time worse by not comparing probate services
A bereavement is bad enough; finding out later that you have been ripped off by your bank or solicitor when dealing with the estate just piles on the misery.
Fees for what is known as “probate” – the process by which you obtain the rights to deal with a deceased person’s affairs – can run into many thousands of pounds, and take months to complete. Yet unless a person’s estate is large and complex, probate cases can be completed for as little as a few hundred pounds.
Where do I start? By finding the will – but only three in 10 people in the UK bother to have one, and there is no legal requirement to subsequently have them registered. Search through the deceased’s paperwork at home, or ask their solicitor, bank, or the Principal Registry of the Family Division or do a paid-for search on websites such as certainty.co.uk (£40).
The will should name one or more executors who can collect the money, pay debts and distribute the rest. But to do so, the executor needs to apply for a “grant of representation”. If there is no will, the next of kin should apply for “letters of administration”, also known as a “grant of administration”.
Is probate compulsory? Not always. If the estate is worth less than £5,000 then it is possible the bank may only need to see the death certificate.
Who starts the process? Only one person needs to do it, normally the executor named in the will, or two if there are beneficiaries below the age of 18. Steve Pett of the Probate Department Ltd, which offers a low-cost probate service, encourages the children of the deceased to be executors, as it is a burden for someone in their 70s or 80s who has just lost their husband or wife. See full post here…
Always remember that the probate process is costly and will eat a lot of your time without the guarantee of successfully claiming the inheritance or property of the deceased, especially if you don’t have credible proof. The good thing is that there are several ways to minimize the probate cost and reduce the duration.
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