STEP 1: GATHER ALL IMPORTANT DOCUMENTS.
a. Important documents = estate planning documents and anything which shows an asset or a liability. i.e. Will, Trust, insurance policy/certificate, deeds, investment statements, all bills, stock certificates, bonds, car, boat & trailer titles etc.
b. Where to find "important documents" = safe deposit box, home safe, "place where person puts their important documents", home office, near the computer, master bedroom, in the kitchen or next to the main phone
Step 2: Determine how the assets are going to eventually pass to the beneficiaries.
Wills or Trusts can have what is called a "tangible personal property list" attached which is just a list of household items (jewelry, paintings, collectibles, furs) and who they are to be distributed to. Take care of these items first.
For all other assets there a 7 methods that they could be distributed depending on how they are titled. Title controls how the asset passes.
1. JOINT TENANCY: A form of co-ownership where the surviving co-owner succeeds to ownership of the asset. The title will say John and Jane Doe, Joint Tenants or JTWRS (which means Joint Tenants with rights of survivorship). Give copy or original of death certificate to institution that has the asset. If it is real estate, speak with an attorney about the documentation needed to be filed to insure that the joint tenant is properly removed. Note: Tenants in Common, is not Joint Tenancy, each party owns ½ of the asset and it is to be treated as outright ownership and will pass under the Will, if applicable or under the Intestate provisions.
*WORD OF CAUTION: if you are looking at this document to plan an estate, please understand that joint tenancy with anyone other than your spouse is not advisable. The asset could be lost if the joint tenant has creditor problems or gets in a car accident and is sued for an amount greater than they have insurance coverage. Plus you give control over the asset to the joint tenant. If you wanted the asset to pass to multiple people according to your will, but you name just one of them as the joint tenant, understand that the asset is the joint tenant's to do with as he or she pleases.
2. PAYABLE ON DEATH: The asset is payable to the named party on the death of the account owner. Give copy or original of death certificate to institution that has the asset.
3. BENEFICIARY DESIGNATIONS: Naming a beneficiary on an asset such as a life insurance policy, IRA, or other retirement plan. Give copy or original of death certificate to institution that has the asset.
4. TESTATE: Last Will and Testament. If the asset is titled in the individual's name only and there is no beneficiary but there is a Will then the asset will need to go through probate. You will need to hire an attorney to open a probate in order to get appointed "personal representative" or "executor" (both mean the same thing, each state has their own title). Then you will take proof of your appointment to the institutions that have control of the asset and be able to do what is needed to be done according to the Will.
5. TRUSTS: The asset needs to be titled in the name of the Trust or have the Trust named as a beneficiary. The Trustee or Successor Trustee can take the Trust or a copy of the first page and signature page to the different institutions that have the assets titled in the trust and do whatever needs to be done to follow the terms of the Trust. An attorney may be consulted to understand the Trust, but only if the Trustee or Successor Trustee needs the assistance.
6. INTESTATE: If the asset is titled in the individual's name only and there is no beneficiary and there is not a Will then the asset will need to go through probate as an intestacy proceeding (which means without a Will). The state statutes will control who the beneficiaries are.
7. SMALL ESTATE AFFIDAVITS: Some States have a procedure in which you can transfer assets with a low value using an affidavit instead of needing to probate the assets. This would be used if an asset is titled in an individual's name only and there is no beneficiary and it has a low value. In Nebraska all of these small items together would need to be worth less than $25,000. Most likely, you would need to contact an attorney to have this affidavit prepared.
Step 3: Determine if any death taxes are due. Please note this is a very cursory review of the death taxes.
There are two taxes when a person dies: (1) a Federal Estate Tax and (3) a State Inheritance Tax. There is an unlimited marital deduction for spouses. So if it is a spouse that has passed away you do not need to worry about the payment of death taxes.
1. Federal Estate Tax:
The federal estate tax is the one that may have heard is repealed. However, please understand that it is only truly repealed in the year 2010, meaning that is the only year there is no Federal Estate Tax under the current Act. You do not need to worry about this tax if the estate is less than 2 million for 2007 & 2008. That number is going up until 2010 when it is repealed, but in 2011 the number goes back down to 1 million. Please also note this number includes life insurance. If you think that you may be dealing with a taxable estate you will need to see an attorney and possibly an accountant. Some lawyer's handle the estate/trust administration and do federal estate tax returns and sometimes it is referred to an accountant. Either way, you want someone experienced in doing that type of return to handle it for you.
2. State Inheritance Tax:
This is determined on a State by State basis. This is not typically a large tax. In Nebraska this is a 1% tax for children receiving assets (after an exemption of $40,000 and some deductions and allowances). You should contact an attorney to discuss the need to pay state inheritance taxes on every estate if it not a spouse that has passed away. If the estate is very small an inheritance tax may not be due, but again it should be checked on.
Step 4: Pay all bills and expenses of administration.
Once you have figured out what all the assets are, how they are titled and how you are going to get them to the named beneficiary, you will need to pay all bills and expenses of administration. Here is a list of the common bills and expenses of administration:
1. Funeral expenses;
2. Attorney's fees;
3. Personal Representative/ Trustee fees;
4. Court costs and recording fees;
5. Publication and Bond costs - if a Probate is opened;
6. Other administrative expenses incurred as a result of death
a. preservation and maintenance of assets of the estate (household utilities, lawn mowing, etc);
b. expenses for the necessary improvements to an asset, provided the improvement increases the value of the asset to the estate;
7. Expenses of last illness;
8. All debts of the decedent which he was liable for payment on the date of death; and
9. Taxes (death taxes) and don't forget final income tax returns.
Note: If there is not enough assets to pay the bills there are state statutes that determine the priority of the bills to be paid.
Step 5: Distribute of the Assets.
Now you previously determined how the assets are going to eventually get to the beneficiary. This was necessary to determine prior to distribution, because if it is necessary to hire an attorney or there are other expenses related to the distribution you will want to have determined what those are and have paid for those prior to distributing the assets. You have now paid all the bills and expenses of administration; you are FINALLY ready to distribute the assets. Look back to step 2 and distribute accordingly, in other words, give the asset to the title owner, and distribute the residuary (what was titled in the individual's name) according to the Will, Trust or Intestate Laws).
Step 6: Close probate Estate if Opened.
Your attorney will assist you with this.
Most probate or estate administration takes about a year to be completed. This is typically because it takes that much time to gather all of the necessary information about all of the assets and liabilities, sell the house, and pay all bills including all taxes. Call Carlson & Burnett at (402) 810-8611 or contact us online to schedule a free consultation.
Disclaimer: This is not intended to be a substitute for legal advice. This is a brief overview of the estate administration process.