Estate debts and avoiding probate

[bingybear]

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Originally Posted by nun My situation is that I expect my estate to grow in retirement. It consists of a large house (paid for) and the usual retirement and regular accounts currently totals around $2M so no issues with Federal estate taxes, but state taxes do come into play. The retirement accounts currently all have beneficiaries. What happens when I die....not on a metaphysical level.....on a financial level. There will be taxes and costs to pay. If I just had a will and everything went into probate the estate would be responsible for the costs and then the money would be distributed to my heirs. If I have named beneficiaries on my retirement accounts I presume they get the full amount of the accounts and any costs/taxes have to be paid out of the estate's other funds. If I was to put my regular accounts and the house in trust would my successor trustee be responsible for paying funeral and estate costs out of the trust?

I really don't really know what the official method of paying off all the fees, debts, and so forth is after death when one effectively avoided probate. My estate plan has most things avoiding probate with a will to cover things like cars, furniture.. items that do not have TOD or beneficiary designations.
If you completely avoid probate or not, your debts, taxes, etc still need to be paid unless you estate is insolvent. If you have assets TOD at death, I don't believe the estate can be deemed insolvent.
So you may want to do a pour over will to cover items not transferred by beneficiary or TOD. This will allow you to define what happens in probate. If you want your trust to fund the expenses, taxes, etc... I can't see why anyone would mind. I would expect that if there were not enough funds there, they could access other funds transferred out. These techniques are there to transfer assets easily and and avoid the cost and public nature of probate, not to avoid paying due taxes or debts. You may want to make your successor trustee or someone who works well with your successor trustee as your personal representative and make your wishes clear.

[nun]

Quote:

Originally Posted by bingybear These techniques are there to transfer assets easily and and avoid the cost and public nature of probate, not to avoid paying due taxes or debts. You may want to make your successor trustee or someone who works well with your successor trustee as your personal representative and make your wishes clear.

In the extreme case what if all my money was in retirement accounts with TOD beneficiaries. That money is part of my estate, it just doesn't need to go through probate. So would the executor have to take money from the retirement accounts to pay the estate's debts before the money was released to the beneficiaries and if so are the expenses charged pro rata?

[bingybear]

from creditcards.com

Quote:

3. Name a person, not your estate, as beneficiary Like life insurance, 401(k) accounts and the family home are shielded from creditors in some states. Other assets, including IRAs and payable-on-death bank and brokerage accounts, can also be difficult for creditors to reach because they have direct beneficiaries and don't go through probate. The key to protecting those types of direct-beneficiary assets from creditors, experts say, is to specifically name an individual as the beneficiary, not your estate. "The worst thing you can do is name your estate as a beneficiary, but unfortunately I see people doing it all the time," Demeros said. "Anything you can keep out of probate is going to be harder for unsecured creditors to grab. But if you name your estate the beneficiary, that asset becomes part of the probate estate." It's also a good idea to review your beneficiaries frequently, at least once a year, and to name a contingent beneficiary in case something happens to your first choice, said Stephen Silverberg, an estate planning lawyer in Roslyn, N.Y. "And if there's a box on the beneficiary form that says 'per stripes,' make sure you check it," he said. Meaning "of the body," in Latin, checking that box ensures that the benefits pass to the lineal descendants of your beneficiary if he or she dies before you do. Read more: 5 steps to prevent your debt from haunting your heirs Follow us: @CreditCardsCom on Twitter | CreditCards.com on Facebook Compare credit cards here - CreditCards.com

almost sounds like you may be able to skirt debt. Not quite what I've always heard.
need to look some more.

[calmloki]

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Originally Posted by marko We take a different tack: We have no kids and our assets are set up to automatically go to the surviving spouse outside of probate.......

Yep. Joint tenants with right of survivorship on just about everything. If one or the other of us dies there is no taxable event - the other continues to own the property/car/contract/account.

If we both die at the same time then it is a matter of some assets that someone will get some part of - not a big concern for me.

[nun]

A married couple is a single financial entity so when one spouse dies it's pretty difficult to get into trouble; the surviving spouse simply carries on....at least financially. The difficulty begins when significant assets are left to non-spouses. If I was married joint accounts, deeds to the house and a will would cover it.

[gretah]

I just finished reading
8 Ways to Avoid Probate
published by Nolo Press - a self help legal book and software company.

http://www.amazon.com/Ways-Avoid-Pro...+avoid+probate

Very simple and direct wording. The authoress makes use of lots of illustrative stories so I could easily understand how various tools and strategies could be put in place. I was very impressed.

I got it from the library. It's on my Kindle wish list.

[Meadbh]

It seems death can bring out the worst in people.....and baboons.

Game of baboons: Violent war for dominance breaks out at Toronto Zoo after alpha female dies

[frugal-one]

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Originally Posted by Dash man That's what a living trust is used for. Find yourself an estate planning attorney...it's worth the money to set it up properly. Sent from my iPhone using Early Retirement Forum

Not all estates need a living trust. We have one child and everything is going to him. In my state, we can put the house title to pass to our child when we both die ... avoiding probate. The cost here was $30. As you did, we put all paid on death (POD) and transfer on death (TOD) for banking and investments. The will should indicate that all bills should be paid (and by whom). In some states (not ours), vehicles can also be set up to go directly to heir and avoid probate. What else is left? In this case, there is no need for a living trust since everything avoids probate.

[Dog]

Just finished up handling my mother's estate and affairs. She didn't have a lot to leave behind, but enough to go through probate including a $100k life insurance annuity that was left to the estate. We just filed the Declaration of Completion so in about 20 days everything is final and I will no longer be responsible. This took longer than expected due to her timeshares. She had two in Mexico (those were fairly easy to return), an in-state timeshare (easy to return) and two out of state Wyndham timeshares. The two Wyndham timeshares took the most time, effort, expense and frustration.
If you own timeshares, please sure review your contracts and check with family before assuming they want to inherit. No one in our family was interested in picking up the timeshares due to the associated maintenance costs and difficulty in getting out of a contract.
DH and I will go to dinner to celebrate the final closing of the estate!


Sent from my iPhone using Early Retirement Forum

[Souschef]

Years ago, we put all our assets into a living trust, because the value of our house in CA was so high, and the limit for estate tax at the time was $1Mil.
We had set up an AB trust, and half the assets went into her side.
The laws changed, raising the limit, but my wife passed away before I could change anything.
It took 10 years to get the trust down to where I could dissolve it. Everything now is in TOD accounts, avoiding probate.