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Probate and Trust Settlement

Wednesday, October 2, 2013

What are the options for distributing an IRA?

IRAs are the most difficult asset type when it comes to probate and trust settlement.  Therefore, if you don't hire an experienced estate planning attorney to help with the other aspects of the settlement, please get help with the IRA.  The rules are complex and the mistakes tend to have huge consequences.

Basically, upon the death of the IRA owner it goes to the individuals and entities specified in the beneficiary designation.  If a trust is named there are additional complications.  Trusts are frequently used as beneficiaries as IRAs to provide asset protection.  Trust rules are complicated and there is a wide misunderstanding of rules in the financial industry.

During a probate or trust settlement, if the decedent was older than 70 1/2, it must be determined if he or she took out their required minimum distribution for the year of death.  If they didn't, then the required minimum distribution must be taken out in the name of the estate prior to distributing the IRA to beneficiaries.

When a beneficiary inherits an IRA they cannot combine it with their own IRAs and special distribution rules apply.  When Bill Sample dies and his IRA is inherited by his son, Junior, the IRA remains in Bill's name with Junior indicated as the beneficiary.  This is called a "beneficiary IRA" and Junior must start taking out a required minimum distribution that is based upon his age at the time the beneficiary IRA was created.  Unlike a regular IRA there is no early withdrawal penalty if the beneficiary is under the age of 59 1/2.  If Junior does not start taking out the minimum distributions beginning with the year following the year of Bill Sample's death, then he must take out the entire IRA within 5 years.


Tuesday, May 7, 2013

What do I do about out- of- state real estate?

 

This is where there is a big difference between real estate and everything else. Personal property (everything that is not real estate) is handled by the decedent’s state of domicile. However, the rule is different for real estate. Each state will require a licensed attorney to administer any out-of-state property. This is one 


Friday, May 3, 2013

After my Mother died, my deceased brother’s young children inherited his share. How do I distribute property left to young children?

 

This can be a real problem because a beneficiary who is less than 18 years old cannot own property. If your mother left either a Will or Living Trust it will usually contain provisions so that a minor’s property can be maintained in a trust. However, if your mom either died intestate (no Will or trust) or if the bequest was part of the beneficiary designation, then the answer depends upon the amount of the inheritance. Generally, if it is a small amount you will be able to put it into a Uniform Transfers to Minors Act account. If the inheritance exceeds the statutory limit you will need to initiate a probate proceeding to have a guardian named for each minor beneficiary. The named guardian will then manage the money for the benefit of the ward (the minor) until they reach the age of 18.


Monday, April 8, 2013

When am I done acting as Personal Representative / Trustee?

As a personal representative, once all matters are settled, a Personal Representative’s Statement to Close must be filed with the court. Final steps leading up to the statement are:

-Paying any outstanding debts;

-Filing the estate income taxes and receiving approval (a Closing Certificate) from the IRS;

-Distributing all assets to rightful beneficiaries; and

-Completing the sale of any property

If any matters need to be handled after the statement is filed, the personal representative would need to petition the court to reopen the probate. Generally the same steps apply for trust settlement; however there is no need to file a statement with the court. The trustee would not have to file any sort of petition to reopen a trust settlement because technically the trust is still “living” many years after distributions have been made and any property is sold.


Friday, April 5, 2013

We have a living trust. How much is it going to cost after one of us dies?

Cost will depend upon the size and complexity of the trust assets, how much of the work your family does and how much is done by attorneys and accountants. Most of the tasks associated with doing a trust settlement are the same as probate. One thing can be said however, and that is that the cost will be significantly less than if the identical estate went through the probate process. By having your family in charge, rather than some judge, many of the tasks are simplified and streamlined.


Friday, March 29, 2013

How much does it cost to go through probate?

As a rough guide figure that estates between $300,000 and $700,000 will probably wind up paying about 3% in attorney and accountant fees. Because some of the probate work does not vary with estate size, smaller estates usually pay a larger percentage and larger estates lower one. In addition, by Wisconsin Statute the personal representative is entitled to a 2% fee.

Before you hire an estate planning attorney to assist with probate please be certain to get a written fee agreement. The fee can be quoted at either an hourly rate or as a fixed fee. If hourly it should specify both the attorney and the paralegal billing rates. There should also be a dollar amount specified that cannot be exceeded without your approval. If the agreement specifies a fixed fee it will probably be for a range to accommodate the many uncertainties that can pop up in a probate administration.


Wednesday, March 27, 2013

How long does probate / settlement take?

The time it takes for either probate or settlement may differ for many reasons. In our experience the average probate takes approximately 7 to 11 months and the average trust settlement can take anywhere from 4 to 7 months. The length of time for probate is generally longer due to court involvement. Often times the sale of real estate can also cause considerable delays. Other factors could include uncooperative heirs, out-of-state property, or obtaining tax clearance.


Monday, March 25, 2013

I’ve been named by my parents as their Personal Representative and successor Trustee. Can I get paid for this and also be reimbursed for my expenses?

Providing this type of assistance can be a lot of work, and it is often appropriate to be compensated. A personal representative’s right to be paid is specified by Statute, whereas the trustee’s right to be paid is authorized in the trust. Typically the amount you can receive is limited to what a professional fiduciary in your area would charge for similar services. On the other hand, reimbursement of expenses you incur is almost always appropriate. If you do choose to receive compensation  for acting as a personal representative or trustee be aware that this is taxable income to you, unlike the reimbursement or expenses.


Tuesday, March 19, 2013

Dad loaned my brother $50,000. After Dad’s death how to we even things up?

This is a difficult area because, unless the loan is documented. There can be a difference of opinion as to whether it was meant to be a loan or a gift. If your brother either signed a note for the loan, or does not dispute that it was meant to be a loan, then the remaining value of the loan is added back into the estate to be included in the total value.

The real problem occurs if there is no note and your brother insists that your Father mean the $50,000 to be a gift. In this case you will need to look for other evidence of your Dad’s intent. Without evidence you have to decide whether this is something worth fighting over. Whatever your Father’s intent, a divided family was certainly not part of it. 


Wednesday, March 13, 2013

Probate&Settlement

Personal property is a person’s “stuff”- the couch, rings, tools, etc…It does not include cash accounts, cars, or land. You must first read the will or trust to see if your parents left any instructions regarding how their personal property should be divided. Often a personal property memo is authorized by the estate plan, which provides that specific items be given to certain people. These are called “specific distributions.” Any items that are not specifically distributed will pass to the beneficiaries of the estate plan. If there is no plan, distribution pattern will be determined by state law. Diving the personal property does not mean you have to cut the couch in three pieces and give one to each heir. Rather, it requires the trustee or personal representative make sure the personal property is divided so that each person receives an amount of property in proportion to their share. The children will often decide among themselves what is fair and the trustee or personal representative has the authority to settle disputes. If certain property is unwanted it is often sold and the proceeds are divided between the beneficiaries.


Wednesday, February 20, 2013

How do my siblings and I divide personal property?

 

Personal property is a person’s “stuff”- the couch, rings, tools, etc…It does not include cash accounts, cars, or land. You must first read the will or trust to see if your parents left any instructions regarding how their personal property should be divided. Often a personal property memo is authorized by the estate plan, which provides that specific items be given to certain people. These are called “specific distributions.” Any items that are not specifically distributed will pass to the beneficiaries of the estate plan. If there is no plan, distribution pattern will be determined by state law. Diving the personal property does not mean you have to cut the couch in three pieces and give one to each heir. Rather, it requires the trustee or personal representative make sure the personal property is divided so that each person receives an amount of property in proportion to their share. The children will often decide among themselves what is fair and the trustee or personal representative has the authority to settle disputes. If certain property is unwanted it is often sold and the proceeds are divided between the beneficiaries.


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