FAQs on Estate Planning and Administration
What is probate?
The Probate Court is the county court that supervises the division and distribution of an individual’s property after that individual has died. The general process is that the Will is filed in the Probate Court, the Court appoints the Executor named in the Will, and the Executor carries out the administration of the estate, giving notice to creditors and family members and filing reports with the court as required by state law and local court rules. The probate process is finished and the estate is closed when all creditors, taxes and administration expenses have been paid, and the remaining property has been distributed as required in the Will.
What is a living trust?
A “living trust” or “revocable trust” is a trust created during life to hold a person’s assets for their own benefit. There are a variety of reasons to transfer assets to a living trust. These reasons include planning for disability, planning to avoid probate after death, and planning for professional asset management.
What happens if I die without a Will?
Many people die without having prepared a Will. When this happens, state law directs how the person’s property is distributed. The rules of “intestate succession” in Tennessee provide, for example, that if a person dies leaving behind a surviving spouse and one child, that deceased person’s property will be divided equally between the surviving spouse and the child. There are different rules for different family configurations.
Will the government take my estate for taxes?
Those with estates larger that the exemption amounts for federal estate tax and state estate or inheritance tax can include planning in their Wills or trusts to minimize the tax that will be owed. In Tennessee, those with estates in excess of $1 million are subject to Tennessee inheritance tax on any amount over the $1 million exemption. In 2010, the federal estate tax exemption is unlimited for those dying in this year, unless Congress passes legislation that reinstates the estate tax for 2010 retroactively. In 2011 the federal exemption returns to $1 million. Planning to minimize estate and inheritance taxes is particularly difficult when the exemption amounts and tax rates are so uncertain. Hopefully Congress will act to remove the uncertainty for those engaged in planning their estates.
What’s the difference between an estate and a trust?
An estate is created at a person’s death with the assets that are titled in that person’s name alone and pass under the person’s Will. The estate is opened in Probate Court after death and closes when the estate administration is complete and all of the assets have been distributed. The Executor is responsible for carrying out the terms of the Will and seeing that the estate is properly administered. If there is no Will, the Probate Court appoints an Administrator to see that the estate is properly administered and the assets distributed according to state law. The estate may be open for anywhere from 9 months to several years depending on the type of assets in the estate and the problems encountered during the administration.
A trust can be created during the life of the creator of the trust (the “grantor”) or after the death of the grantor. Depending on the purpose it serves, a trust can last for a few years or for decades. A trust can be created to hold assets given to a minor child until he or she reaches age 18. A trust can be created for tax purposes to hold assets for the benefit of a surviving spouse for the rest of his or her life. A trust can be created to hold a life insurance policy and the proceeds of the policy after the death of the insured. The Trustee is the person responsible for holding the trust assets, making sure assets are properly invested, and distributing trust income and principal as directed by the trust agreement.