Estate planning is the process of anticipating and arranging, during a person's life, for the management and disposal of that person's estate during the person's life, in the event the person becomes incapacitated and after death. The planning includes the bequest of assets to heirs and may include minimizing gift, estate, generation skipping transfer, and taxes. Estate planning includes planning for incapacity as well as a process of reducing or eliminating uncertainties over the administration of a probate and maximizing the value of the estate by reducing taxes and other expenses. The ultimate goal of estate planning can only be determined by the specific goals of the estate owner and may be as simple or complex as the owner's wishes and needs directs. Guardians are often designated for minor children and beneficiaries in incapacity.
Your executor must find, secure, and manage your assets during the probate process, which commonly takes a few months to a year. Depending on the contents of your will, and on the amount of your debts, the executor may have to decide whether or not to sell your real estate, securities, or other property. For example, if your will makes a number of cash bequests but your estate consists mostly of valuable artwork, your collection might have to be appraised and sold to produce cash. Or, if you have many outstanding debts, your executor might have to sell some of your property to pay them.
As a result, the individual has a lower effective cost of giving, which provides additional incentive to make those gifts. And of course, an individual may wish to make charitable contributions to a variety of causes. Estate planners can work with the donor in order to reduce taxable income as a result of those contributions, or formulate strategies that maximize the effect of those donations.
Whether to spend your time and effort planning to avoid probate depends on a number of factors, most notably your age, your health, and your wealth. If you're young and in good health, adopting a complex probate-avoidance plan now may mean you'll have to re-do it as your life situation changes. And if you have very little property, you might not want to spend your time planning to avoid probate because your property may qualify for your state's simplified probate procedure.
Homestead property, which follows its own set of unique rules in states like Florida, must be dealt with separately from other assets. In many common law jurisdictions such as Canada, parts of the US, the UK, Australia and India, any jointly-owned property passes automatically to the surviving joint owner separately from any will, unless the equitable title is held as tenants in common.
Assets that could make up an individual’s estate include houses, cars, stocks, artwork, life insurance, pensions, and debt. Individuals have various reasons for planning an estate, such as preserving family wealth, providing for a surviving spouse and children, funding children's or grandchildren’s education, or leaving their legacy behind to a charitable cause.
Informal probate proceedings generally do not require a hearing. The personal representative files the death certificate and will, along with a petition to admit the will under informal probate. The clerk of probate court reviews the submissions and recommends to the court that the will be probated. Once the court issues the order for informal probate, the personal representative files a series of forms that demonstrate that notice has been given to all interested parties about the probate, the decedent's creditors have been paid, and the estate's assets have been collected, appraised, and distributed to the designated heirs.
Intentional destruction: pursuant to Section 14 of the Wills Act of Malaysia a will can be burnt, torn or otherwise intentionally destroyed by the testator or a third party in the presence of the testator and under their direction, with the intention to revoke the will. Accidental or malicious destruction by a third party does not render the revocation effective.
Conversion to the Islamic faith: Section 2(2) of the Wills Act 1959 states that the Act does not apply to wills of persons professing the religion of Islam. When the testator (previously a non-Muslim) embraces the Islamic faith, the will made previously shall be void as it no longer comes under the ambit of the Wills Act 1959. The testator, after conversion, can write a new will in accordance with the Islamic Laws whereby only one third of the total estate can be disposed of by way of a will, and the remaining two thirds by Sijil Faraid (a certificate of Muslim inheritance law). If the Muslim testator would like to dispose of more than one third of their total estate, the consent of all lawful beneficiaries must be obtained.
In general, the probate process involves collecting the decedent's assets, liquidating liabilities, paying necessary taxes, and distributing property to heirs. Probate procedures are governed by state law and have been the subject of debate and reform since the 1960s. The Uniform Probate Code (UPC) was first proposed in 1969 by the National Conference of Commissioners on Uniform State Laws and the House of Delegates of the American Bar Association. The prime focus of the UPC is to simplify the probate process. The UPC, which has been amended numerous times, has been adopted in its entirety by 16 states: Alaska, Arizona, Colorado, Florida, Hawaii, Idaho, Maine, Michigan, Minnesota, Montana, Nebraska, New Mexico, North Dakota, South Carolina, South Dakota, and Utah. The other 36 states have adopted some part of the UPC but still retain distinct procedures.
Mediation serves as an alternative to a full-scale litigation to settle disputes. At a mediation, family members and beneficiaries discuss plans on transfer of assets. Because of the potential conflicts associated with blended families, step siblings, and multiple marriages, creating an estate plan through mediation allows people to confront the issues head-on and design a plan that will minimize the chance of future family conflict and meet their financial goals.
Life insurance serves as a source to pay death taxes and expenses, fund business buy-sell agreements, and fund retirement plans. If sufficient insurance proceeds are available and the policies are properly structured, any income tax on the deemed dispositions of assets following the death of an individual can be paid without resorting to the sale of assets. Proceeds from life insurance that are received by the beneficiaries upon the death of the insured are generally income tax-free.
In a formal probate proceeding, a hearing must be held to establish the death of the testator, the residency of the decedent, the genuineness of the will, its conformance with statutory requirements for its execution, and the competency of the testator at the time the will was made. These requirements are usually fulfilled by the attesting witnesses who were present at the time the will was made and who certify that it was properly executed. The number of attesting witnesses is prescribed by law. If fewer than the required number witness a will, it will be declared void, and the testator's property will pass according to the laws of descent and distribution.
Before exploring the types of probate, we want to express our option that if you have been named as the executor of an estate, probating a will is not something that you should try to do alone. As the executor, you have the fiduciary responsibility to make sure all estate matters are handled properly, and experienced legal counsel is essential to avoid needless mistakes and delays in the probate process.
The probate process begins when the personal representative files with the clerk of the probate court a copy of the death certificate along with the will and a petition to admit the will to probate and to grant letters testamentary, which authorize him or her to distribute the estate. Although the personal representative usually files the probate petition, it can be filed by any person who has a pecuniary interest in the will. In states governed by the UPC, the personal representative must elect whether to proceed with formal or informal probate at the time of filing. However, a probate proceeding may be switched from informal to formal during the course of administration, if issues so warrant.
A trust may be used as an estate planning tool, to direct the distribution of assets after the person who creates the trust passes away. Trusts may be used to provide for the distribution of funds for the benefit of minor children or developmentally disabled children. For example, a spendthrift trust may be used to prevent wasteful spending by a spendthrift child, or a special needs trust may be used for developmentally disabled children or adults. Trusts offer a high degree of control over management and disposition of assets. Furthermore, certain types of trust provisions can provide for the management of wealth for several generations past the settlor. Typically referred to as dynasty planning, these types of trust provisions allow for the protection of wealth for several generations after a person's death.