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Probate & Trust Administration
Planning is just the first step.
Upon death, the terms of the trust or in the case of individuals
subject to probate, the administration of your estate needs to be
carried out.
Probate
Probate is a court-supervised
process that occurs whenever the deceased dies leaving property that
has not otherwise been insulated from probate. During probate, the
court appoints a personal representative to represent the estate
(sometimes called the executor), and the personal representative often obtains an
attorney to represent him or her. Together, their roles include:
Identifying the estate property and getting it appraised, identifying
creditors and deciding whether to pay their claims, selling estate property, paying
taxes of the deceased, performing an accounting, and distributing the
property.
The time frames between these
events, as well as the compensation given to both the representative
and attorney are established by law. Compensation is based on a
percentage of those assets subject to probate. Even a “clean” estate
without many issues will take at least six months to administer, and
valuable probate assets (like California real estate) can increase
probate fees significantly.
Trust Administration
This can often times be a quick and
orderly process, assuming your assets are fairly straightforward and
there are no conflicts between beneficiaries. The reason is that,
unlike probate, carrying out the directions in your trust is a
private, family affair that generally can stay clear of the courtroom.
Some of the major events that take place during administration are:
Identifying the assets in your trust, paying creditors, paying taxes,
performing an accounting, and distributing the property.
Estate Tax
The Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA) has changed estate planning
considerably. The most profound effect of its passage is the raising
of the estate tax limits so that individuals whose estates just a year
or two ago were above the tax limits (and thus subject to estate tax
upon death) are now below those limits, as follows:
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Year of Death |
Exclusion Amount |
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2002 or 2003 |
$1,000,000 |
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2004 or 2005 |
$1,500,000 |
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2006-2008 |
$2,000,000 |
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2009 |
$3,500,000 |
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2010 |
Unlimited-Tax Repealed |
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2011 or beyond |
$1,000,000 |
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In addition, during this time
period the maximum estate tax rate is declining from 50% in year 2002
to 45% in years 2007-2009.
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