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What You Need to Know About Probate and Inheritance

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Death. It’s not a topic most people want to talk about. While it can be uncomfortable and even upsetting, knowing what happens to property, money, and personal items after someone dies can make the process of handling the aftermath a little less stressful.

If you have or are set to inherit property from a friend or family member, you’ll want to have some idea of what the probate process is and how it could affect you.

Common inheritance and probate terminology

When you’re dealing with inheritance or probate, there are a few standard terms you’ll hear. Understanding the words used during this process is essential, so you know what’s going on.

Beneficiary, heir, inheritor: These three terms are used interchangeably about the person or group of people who legally inherit an estate. These individuals or groups are typically named in a will.

Debts: When a person dies, the estate pays out any debts before inheritance goes to the family. You are not responsible for the debt incurred by your deceased family member. Still, the estate will pay debts before distributing the rest.

Estate:  An estate simply refers to any assets the deceased left behind. This could include property, vehicles, investment funds, cash, animals, businesses, etc.

Estate Taxes: There are typically federal and state taxes to be paid after someone dies. Not all states charge an estate tax. For example, Utah does not collect any tax unless the beneficiary inherits more than $11.18 million. The inheritors are sometimes required to pay the tax.  The Federal Inheritance Tax ranges from 18% to 40%.

Executor:  The executor is the person legally allowed to manage estate assets.

Probate:

Trust: A trust is a legal document dictating how assets will be distributed to beneficiaries. Trusts provide more protection than a will and can avoid the probate process entirely. Trusts can’t dictate the custody of minor children. Irrevocable trusts have tax benefits and are protected against creditors.

A Will: A will is like a trust in that it dictates the distribution of property. It can also specify who should take custody of minor children. However, a will is more easily contested, doesn’t have protection against creditors, and offers no tax benefits. Additionally, wills are subject to the probate process.

What Happens During Probate

The probate process involves appointing someone to represent the deceased’s estate. This representative’s job is to determine if there is a valid will. The process of probate is usually required if an estate includes land and houses or has a net worth more than $100,000.

Probate can be formal or informal. In an informal case, the court appoints a representative without a hearing. In formal cases, a hearing is required. This usually happens if there’s disagreement among the family about who should represent the estate.

Sometimes the estate’s executor will be required to pay a bond, or an insurance policy, to protect the estate from an error by the executor. During probate, the following occurs:

  1.  The executor must locate all assets in the estate.
  2. The next step is to determine the value of assets.
  3. The executor finds and notifies creditors who may have a claim on payment from the estate
  4. The executor pays debts from the estate
  5. The executor prepares and files tax returns for the deceased. Taxes due must be paid from the estate.
  6. Estate taxes must be paid within nine months unless the executor files an extension
  7. The executor distributes remaining assets as dictated by the deceased will/trust.

If there is no will, the assets typically pass directly onto any living relative.

If you need to liquidate assets to pay taxes, selling a home for cash could be the easiest and fastest solution. Brick purchases homes in any condition. We understand that this can be a difficult time mentally and emotionally.

We’re here to help you get liquid funds as quickly as possible so you can focus on spending time with your loved ones.

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