.
Estate planning often focuses on the benefits of a trust compared to probate.
After studying the issue, it appears that probate for my estate might actually be preferable.
But I’m not entirely sure my understanding of the issues is correct.
Below are 11 reasons why I'm thinking probate might a better choice for my estate.
QUESTION: Is my understanding about these issues correct?
========================
ISSUE 1:
My estate.
My only probate asset is my small residence which will be sold after death.
Sole beneficiary and executor is nephew living out of state.
My goal is to make the after-death process as easy as possible for him.
It’s often said the best way to achieve this is to avoid probate.
My understanding is there are 4 ways to avoid probate on a residence:
— transfer on death deed
— joint ownership
— life estate
— revocable trust
The first option isn’t available in my state (Pennsylvania), and the next two aren’t suitable for me.
So the choice is between a trust and probate.
========================
ISSUE 2:
Probate in my state is not unduly difficult or expensive.
Unlike some states, probate in PA is relatively simple and usually does not involve court proceedings.
========================
ISSUE 3:
Tasks my nephew must handle himself are about the same with trust or probate.
After death, my nephew’s major tasks are to clean out my residence and arrange to sell it.
This is true whether trust or probate is used.
========================
ISSUE 4:
Time needed to complete the estate process is the same with trust or probate.
In Pennsylvania, a trust usually does not make the estate process any shorter.
Creditors have one year after death to submit claims. This is true whether probate or a trust is used.
This means the estate process won’t end any sooner with a trust.
========================
ISSUE 5:
Even with a trust, probate might be needed.
If I used a trust to avoid probate, the plan could be thwarted by certain circumstances.
One possible cause is a check received in my name after death, as in these examples:
— I pay $5000 for reservation with a tour company. I die before trip begins. Company issues refund check in my name.
— I’m injured in accident caused by a driver. Driver’s insurance company issues $10,000 check in my name, but I die before check arrives.
With probate, executor opens an estate bank account and can endorse & deposit these checks.
Without probate, no one has authority to endorse these checks.
POA agent can’t endorse them because POA expires at death.
A successor trustee has no authority to endorse them.
If after-death checks total less than $50,000, a small estate process can be used.
But a Pennsylvania lawyer says this about the small estate process: "Very few people use this procedure because it is more time-consuming and troublesome than the regular probate procedure."
This apparently means that, if checks are received in my name after death, probate might be needed even with a trust for my residence.
========================
ISSUE 6:
If my residence is sold before death, a trust provides no benefit.
My residence might be sold before death.
I might decide to move to a rental apartment, or I might need assisted living or nursing care.
In that case, the trouble & expense of creating a trust will turn out to be unneeded.
If I become incapacitated, my nephew is my power of attorney agent and would sell my residence.
For selling real estate during incapacity, a trust in my state provides no major benefit compared to power of attorney.
========================
ISSUE 7:
For my estate, a trust won’t provide any benefit beyond avoiding probate.
A trust can have important benefits in addition to avoiding probate.
But in my case, avoiding probate would be the only benefit.
========================
ISSUE 8:
Without probate, certain after-death tasks can be difficult or impossible.
Mail forwarding: After death, a nephew must forward my mail to his address. The post office says: “You will need to provide valid proof that you are the appointed executor or administrator and authorized to manage the deceased person’s mail.” When I asked a local branch how mail can be forwarded if there’s no probate, I was told: “it can’t be done.”
Obtaining a 1099: After death, nephew must obtain a 1099 for my pension to prepare my final tax return. A 1099 will be mailed to my address the following January, but I will no longer be living there. As explained above, without probate my mail apparently can't be forwarded. Even if my nephew could find a way to forward my mail, forwarding can be unreliable. If a nephew needs my 1099 after death, the pension plan said he must provide a copy of his executor appointment document. Otherwise, they won’t provide any information about my pension.
Medial records: After death, obtaining medical records might be needed for an autopsy or for billing or insurance purposes. It’s been reported that some heath care providers will release records only to a probate executor or administrator.
Social Security: Without probate, it might be impossible for my nephew to obtain my final Social Security payment.
Social Security policy is that a payment can’t be issued in the name of a deceased person.
If death occurs on May 3, payment for April is due and would normally be received in May.
But after being notified of death, Social Security will either stop the payment, or will “reclaim” the payment from the bank if it’s too late to stop it.
The payment must then be requested using Form SSA-1724 and must be paid to the spouse, child, or parent of the decedent, or to the “legal representative” of the estate.
I don’t have a living spouse, child, or parent. So the payment can only be made to the “legal representative” who must submit SSA-1724 along with “a certified copy of your letters of appointment.”
Without an executor to serve as “legal representative,” there is apparently no way for my nephew to obtain my final Social Security payment.
========================
ISSUE 9:
A trust for my residence won’t save money compared to probate.
In my city, a homestead exemption gives a discount on property tax for an owner-occupied residence.
My annual discount is $1400. But with a trust, I won’t get the discount.
My city’s website says:
"To qualify for the Homestead Exemption, the property owner must be a “natural person.” Because a trust is a legal entity that holds property for the benefit of another, it is not eligible for the exemption."
During the next 10 years, I would pay an extra $14,000 in tax, which is probably more than probate would cost.
========================
ISSUE 10:
Even with a trust, nephew must hire lawyer to prepare inheritance tax return.
Pennsylvania inheritance tax for nephews is 15% on all assets (probate & non-probate).
The tax return appears to be too difficult & complex to self-prepare.
The state bar association says:
"The preparation of an inheritance tax return by a … person not licensed to practice law … constitutes the unauthorized practice of law."
So even with a trust, my nephew must hire a Pennsylvania estate lawyer to prepare the return.
========================
ISSUE 11:
A probate lawyer can provide guidance to my out-of-state nephew.
If my residence is in a trust at death, I suspect my nephew would try to handle all estate matters himself to avoid the expense of consulting a lawyer.
This would likely cause stress, problems, & mistakes.
My priority is to make the after-death process as easy as possible for him.
With probate, a lawyer is available during the entire process to provide guidance, prepare the inheritance tax return, and help ensure things are done correctly.
.
Estate planning often focuses on the benefits of a trust compared to probate.
After studying the issue, it appears that probate for my estate might actually be preferable.
But I’m not entirely sure my understanding of the issues is correct.
Below are 11 reasons why I'm thinking probate might a better choice for my estate.
QUESTION: Is my understanding about these issues correct?
========================
ISSUE 1:
My estate.
My only probate asset is my small residence which will be sold after death.
Sole beneficiary and executor is nephew living out of state.
My goal is to make the after-death process as easy as possible for him.
It’s often said the best way to achieve this is to avoid probate.
My understanding is there are 4 ways to avoid probate on a residence:
— transfer on death deed
— joint ownership
— life estate
— revocable trust
The first option isn’t available in my state (Pennsylvania), and the next two aren’t suitable for me.
So the choice is between a trust and probate.
========================
ISSUE 2:
Probate in my state is not unduly difficult or expensive.
Unlike some states, probate in PA is relatively simple and usually does not involve court proceedings.
========================
ISSUE 3:
Tasks my nephew must handle himself are about the same with trust or probate.
After death, my nephew’s major tasks are to clean out my residence and arrange to sell it.
This is true whether trust or probate is used.
========================
ISSUE 4:
Time needed to complete the estate process is the same with trust or probate.
In Pennsylvania, a trust usually does not make the estate process any shorter.
Creditors have one year after death to submit claims. This is true whether probate or a trust is used.
This means the estate process won’t end any sooner with a trust.
========================
ISSUE 5:
Even with a trust, probate might be needed.
If I used a trust to avoid probate, the plan could be thwarted by certain circumstances.
One possible cause is a check received in my name after death, as in these examples:
— I pay $5000 for reservation with a tour company. I die before trip begins. Company issues refund check in my name.
— I’m injured in accident caused by a driver. Driver’s insurance company issues $10,000 check in my name, but I die before check arrives.
With probate, executor opens an estate bank account and can endorse & deposit these checks.
Without probate, no one has authority to endorse these checks.
POA agent can’t endorse them because POA expires at death.
A successor trustee has no authority to endorse them.
If after-death checks total less than $50,000, a small estate process can be used.
But a Pennsylvania lawyer says this about the small estate process: "Very few people use this procedure because it is more time-consuming and troublesome than the regular probate procedure."
This apparently means that, if checks are received in my name after death, probate might be needed even with a trust for my residence.
========================
ISSUE 6:
If my residence is sold before death, a trust provides no benefit.
My residence might be sold before death.
I might decide to move to a rental apartment, or I might need assisted living or nursing care.
In that case, the trouble & expense of creating a trust will turn out to be unneeded.
If I become incapacitated, my nephew is my power of attorney agent and would sell my residence.
For selling real estate during incapacity, a trust in my state provides no major benefit compared to power of attorney.
========================
ISSUE 7:
For my estate, a trust won’t provide any benefit beyond avoiding probate.
A trust can have important benefits in addition to avoiding probate.
But in my case, avoiding probate would be the only benefit.
========================
ISSUE 8:
Without probate, certain after-death tasks can be difficult or impossible.
Mail forwarding: After death, a nephew must forward my mail to his address. The post office says: “You will need to provide valid proof that you are the appointed executor or administrator and authorized to manage the deceased person’s mail.” When I asked a local branch how mail can be forwarded if there’s no probate, I was told: “it can’t be done.”
Obtaining a 1099: After death, nephew must obtain a 1099 for my pension to prepare my final tax return. A 1099 will be mailed to my address the following January, but I will no longer be living there. As explained above, without probate my mail apparently can't be forwarded. Even if my nephew could find a way to forward my mail, forwarding can be unreliable. If a nephew needs my 1099 after death, the pension plan said he must provide a copy of his executor appointment document. Otherwise, they won’t provide any information about my pension.
Medial records: After death, obtaining medical records might be needed for an autopsy or for billing or insurance purposes. It’s been reported that some heath care providers will release records only to a probate executor or administrator.
Social Security: Without probate, it might be impossible for my nephew to obtain my final Social Security payment.
Social Security policy is that a payment can’t be issued in the name of a deceased person.
If death occurs on May 3, payment for April is due and would normally be received in May.
But after being notified of death, Social Security will either stop the payment, or will “reclaim” the payment from the bank if it’s too late to stop it.
The payment must then be requested using Form SSA-1724 and must be paid to the spouse, child, or parent of the decedent, or to the “legal representative” of the estate.
I don’t have a living spouse, child, or parent. So the payment can only be made to the “legal representative” who must submit SSA-1724 along with “a certified copy of your letters of appointment.”
Without an executor to serve as “legal representative,” there is apparently no way for my nephew to obtain my final Social Security payment.
========================
ISSUE 9:
A trust for my residence won’t save money compared to probate.
In my city, a homestead exemption gives a discount on property tax for an owner-occupied residence.
My annual discount is $1400. But with a trust, I won’t get the discount.
My city’s website says:
"To qualify for the Homestead Exemption, the property owner must be a “natural person.” Because a trust is a legal entity that holds property for the benefit of another, it is not eligible for the exemption."
During the next 10 years, I would pay an extra $14,000 in tax, which is probably more than probate would cost.
========================
ISSUE 10:
Even with a trust, nephew must hire lawyer to prepare inheritance tax return.
Pennsylvania inheritance tax for nephews is 15% on all assets (probate & non-probate).
The tax return appears to be too difficult & complex to self-prepare.
The state bar association says:
"The preparation of an inheritance tax return by a … person not licensed to practice law … constitutes the unauthorized practice of law."
So even with a trust, my nephew must hire a Pennsylvania estate lawyer to prepare the return.
========================
ISSUE 11:
A probate lawyer can provide guidance to my out-of-state nephew.
If my residence is in a trust at death, I suspect my nephew would try to handle all estate matters himself to avoid the expense of consulting a lawyer.
This would likely cause stress, problems, & mistakes.
My priority is to make the after-death process as easy as possible for him.
With probate, a lawyer is available during the entire process to provide guidance, prepare the inheritance tax return, and help ensure things are done correctly.
.
Statistics: Posted by jello77 — Sun Sep 15, 2024 10:50 am