Financial Trend Blog

The legal process of the distributing of the estate of a deceased individual is known as probate. Probate is often a time-consuming and confusing process for those who are involved. Most people lack a knowledge of the probate process because of inexperience with the process.

While probate is rarely easy, an adequate knowledge and understanding of the process can decrease stress, and increase your confidence that everything is being done properly. Anyone involved in probate should understand the following:

1 – In cases where a valid will exists, the individual named in the will as the executor is responsible to see that the deceased’s instructions are carried out.

Probate law primarily concerns the execution, interpretation, and contest of legal wills and estates. A probate court may be known by various names depending on where it is, however, probate law always concerns how a deceased person’s estate is handled by his executor or heirs. The word probate describes the process through which a person’s final wishes are carried out with regard to who should administer the process, how assets will be sold and divided, and what will happen to any existing estate. The estate is the term used to refer to the legal entity that is comprised of a decedent’s assets after they themselves have died. An estate may own property, profit, pay taxes, be sued, and owe debts.

Recently I shared the heart-wrenching story of a young soldier who had to deal with the unexpected death of his mother. She didn’t have her affairs in order and now her son has the extremely difficult task of recreating her financial details from scratch. Here are some simple steps you can take to ensure that your loved ones aren’t left in a lurch.

First thing you need to do is create a ‘survivor file’ which will contain all of your important financial and personal information. Secondly, you need to tell someone you trust where to find it should the need arise. Maybe you’ve put your will or living trust in a safety deposit box. Perhaps you have a filing cabinet containing your pertinent financial information. Your computer might hold the bulk of your money details.

Q. Jeff, I want to ask your opinion regarding Health Savings Accounts. On April 1st, the company I work for is changing our current Blue Cross health insurance to Guardian Insurance set up as a HRA. I am single and currently have a $500 deductible. Under the HRA, the deductible will be $2,000.

Currently, the premium is split 50/50 between employer and employee. I pay $205.00 per month. Under the HRA it will still be split 50/50, but the employer is going to fund each employee’s Personal Medical Fund up to $900. As I understand it, my responsibility will be $1,100 of deductible before any insurance coverage kicks in. We have not been given any rates for the HRA insurance, but I imagine it will be lower than the monthly $205.00.

There are folks who are willing to sell a living trust to anything that moves. They frequently claim that everybody needs a living trust or two. Well, almost everybody. At the other extreme, there are those claiming that (almost) nobody needs living trusts.

No wonder many of you are confused. So, do you really need a living trust?

A living trust is just one of many different tools in financial and estate planning. But, living trusts can help you achieve goals not possible with other planning tools. At the same time, they require effort, time and resources.

Living trusts can serve you well while you are alive. They can also serve your family members and others you love long after you are gone. Just like with a will, you can provide for distribution of property after death.

Last week I explained in theory how you can legally avoid paying taxes on gifts and inheritances. Avoiding taxes on gifts and inheritances is based on cost-basis. To help you apply this to your situation I want to share some real-life examples of how my clients use these principles to legally avoid paying taxes on gifts and inheritances.

First, let’s briefly review cost-basis. When you receive an asset as a gift and sell it, you are responsible for paying capital gains tax. Capital gains tax is calculated using cost-basis. Cost-basis refers to how much money was invested in an asset. When an asset is sold, the cost-basis is subtracted from the amount received to determine the gain or loss. Your amount of gain or loss then determines how much you will pay in capital gains tax. In other words, you pay tax on the profit.

Trusts come in many different shapes and forms. A living trust is one type of trusts. That’s right, there are many different types of trusts. Living trusts are ones created during lifetime. They are also called “inter-vivos”, a Latin term meaning “among or between the living”

The phrase “revocable trust” does not refer to any one specific arrangement. It involves a range of various trusts. Each of them can be used to accomplish different objectives.

Such trusts can be revoked. In other words, they can be amended or terminated altogether. The ownership of property contributed to revocable trusts changes on paper. But, you are still in full control. You can continue to manage and enjoy such property same as before.

Nobody likes to pay taxes. If done incorrectly, though, the way you inherit an asset can result in you needlessly paying tens of thousands of dollars in taxes. Knowing some simple rules will reduce your tax bill and allow you to keep more of what you inherit. And it will also keep you from creating tax headaches for loved ones to whom you wish to gift assets.

Whenever an asset is sold, Uncle Sam wants to collect capital gains tax. And that tax is figured using cost basis. Cost basis refers to how much money you invested in a given asset. When sold, the cost basis is subtracted from the amount received to determine the gain or loss. Your amount of gain or loss then determines how much you will pay in capital gains tax.

Whenever a person dies and leaves behind debt creditors, the administrator or executor of that person’s estate faces certain challenges in quickly selling real and personal property in order to satisfy creditors. The probate process is long and drawn out, and every shortcut available should be sought in order to shorten the amount of time that property is tied up in the process. Recently, with the great success of E-bay, people have discovered a quick and efficient way to unload property in order to satisfy debts. Not only has E-bay made the general premise of auctioning easier, it has also made it more understandable and desirable to the masses.