The loss of a loved one is one of life’s most painful traumas, and the responsibility for handling the affairs of the deceased can make it even more stressful. The level of estate planning done prior to death will determine whether estate administration will be a difficult undertaking or a simple task. In either case, caring and competent professional help can make the job easier.
Tasks that have to be performed after the passing of a loved one will vary based on whether the departed individual had a will or not. In determining whether probate (a court-managed process where the assets of the deceased are managed and distributed) is needed, the assets owned by the individual, and whether these assets were titled, must be considered. It’s important to understand that assets titled jointly with another person are not probate assets and will normally pass to the surviving joint owner. Also, assets such as life insurance and retirement assets that name a beneficiary will pass to the named beneficiaries outside of the court probate process.
If the deceased relative had formed a trust that was properly funded during their lifetime, then the trust assets will also not pass through the probate process and will be available to provide for the named beneficiaries with little delay.
Each state’s rules are different, so it is important to seek proper legal advice if you are charged with handling the affairs of a deceased family member or friend. Assuming probate is required, there will be a process that you must follow to either file the will and ask to be appointed as the personal representative or executor (assuming you were named executor in the will) or file for probate of the estate without a will (this is referred to as dying “intestate” which simply means dying without a will). Also, there will be a process to publish notice to creditors and you may be required to send each creditor specific notice of the death. Those creditors will have a certain amount of time to file a claim against the non-exempt estate assets. If a legitimate creditor files a claim, the claim can be paid out of the estate assets. Depending on your state’s laws, there may also be state inheritance taxes (Florida is one of the few states with no such taxes) that have to be paid and, if the estate is large enough, a federal estate tax return may also have to be filed along with any taxes which may be due. Estates subject to the federal estate tax are increasingly rare. The lifetime gift and estate tax exemption is adjusted for inflation each year and is $5,430,000 in 2015. Only less than 0.2% of U.S. estates that exceed this amount are subject to estate tax.
After the estate is fully administered, creditors paid, and tax returns filed and taxes paid, the estate can be fully distributed to the named beneficiaries or heirs. Given the many steps involved and the complexities of probate, you should seek legal counsel to help you through the process.