| Dear Mr. Premack: I have been told
that when a person has less than $300,000 on her death, her Will does
not have to go to probate. My total assets are under $200,000. I leave
everything to my children in my Will, and I am a widow. My question:
does my Will have to go through probate when I die? – E.S.
The asset limit you mention does NOT have a bearing on whether your
estate goes through probate. Probate is triggered by what you own and
how you own it. The total asset value of your estate is vitally
important, but for a different reason: estate taxes. Your informant may
have confused estate taxes with probate.
Probate and estate taxes seem to walk hand-in-hand, but they are not
the same thing. While any estate valued at less than $625,000 does not
have to pay estate taxes, there are no dollar limits on what type of
estate goes through probate. It is true that any estate below the
tax-free limit (which was $600,000 in 1997 – half of which is
$300,000) does not pay estate tax.
Probate is another story. Probate is the legal process of
administering a decedent's estate. It exists to protect your heirs and
your creditors, and to ensure that your wishes are followed after you
die. There are several legal procedures, ranging from extremely complex
to fairly simple, that are all labeled "probate."
Any size estate can avoid probate with proper advance planning. There
are three basic techniques: a) die without assets; b) use survivorship
rights, or c) use a trust.
Your estate may be the type where survivorship arrangements would be
useful. Your $200,000 probably consists of a house, some bank accounts
and a few investments. Since you want your kids to share the estate when
you die, you could name them as "joint tenants with rights of
survivorship" or as "pay-on-death" beneficiaries of your
investments. Your legal advisor can give you specific tasks needed to
rearrange the assets.
The house could be set up with survivorship rights or with a
"life estate." Life estate means that you own the right to use
and enjoy the house while you are alive, but when you die the kids
automatically own it. Probate is not necessary because title is conveyed
by the existing deed.
Trusts are usually used with estates larger than yours. A trust
offers maximum flexibility; you can avoid both probate and estate taxes
when the trust is written to include a "by-pass" provision.
Having a large estate is not a requirement for use of a trust. If you
want your moderately sized estate to pass to very young heirs, or to
heirs who have no management skills, then a trust may serve you well –
no matter what the size of your estate is.
The bottom line: probate is a useful and important legal process.
Even so, not all estates have to go through probate. Advance planning
with your attorney and financial consultant are the key if you want your
estate to stay out of probate. |
