Jalene Hahn: Try these steps to minimize your probate estate

Personal Finance: Jalene HahnEstate planning is not just for the wealthy. Anyone with a bank account, house, car or other personal property should have a will. It is especially important if you have minor children in need of a guardian, have a blended family, are unmarried couple in a committed relationship or have complicated family dynamics. Settling an estate can be a daunting task and, without careful planning, can cause undue emotional strain, additional costs and complexity that loved ones will need to navigate.

Probate is the process by which debts are paid and assets are divided after a person passes away. The probate process can apply whether or not the deceased left a will. Dying without a will is known as “intestacy.” If you die “intestate,” the state of Indiana has legislated who will inherit, and you might not like the result. The surviving spouse receives 100% only if there are no children and no living parents of the deceased.

Probate is a court-supervised legal process that gives someone—usually the surviving spouse or other close family member—authority to gather the deceased person’s assets, pay debts and taxes, and eventually transfer assets to the people who inherit them. In an estate, there are two classifications of assets—those that go through probate and those that do not. Only assets that are subject to the probate process need to go through probate. All other assets pass to new owners without oversight from the probate court.

Probate assets are those accounts and things that are only titled or held in the name of the decedent. Nonprobate assets pass outside the decedent’s last will and testament. Here are some ways to move assets out of the probate process:

 Create a living trust. Assets must be moved into the name of the trust. There are advantages and disadvantages to living trusts that you should understand before creating one, and they require more upfront work to execute.

 Update any assets such as retirement accounts or insurance policies, which have beneficiary designations, and be sure to name contingent beneficiaries. Beneficiaries should be reviewed to make sure they still match your wishes.

 Create payable on death (POD) or transfer on death (TOD) accounts and assets.

Assets that go through probate make up what is called the “probate estate.” In Indiana, if the value of the gross probate estate, less estate expenses, does not exceed $100,000, it is considered a small estate and can skip probate altogether. As of July 1, the value of a small-estate classification was increased from $50,000 to $100,000.

Gross probate estates over $100,000 are subject to probate. There are two types of probate: unsupervised or supervised. Unsupervised probate means the personal representative is given more discretion over how to administer the estate. Supervised probate means the court supervises everything the personal representative does for the estate. The personal representative will need to submit for court approval an inventory of personal property in the estate; notice of sale, all bids received, and notice to other bidders that one has been accepted for real property in the estate; attorney’s fees; and the personal representative’s commission.

Supervised probate administration requires a lot of paperwork and court oversight. This supervision is generally reserved for complicated estates with difficult family dynamics, larger estates where there was no will, or for estates with unusual or difficult-to-value-and-sell assets.

With proper planning, probate does not have to be burdensome or expensive. Naming and keeping beneficiary designations updated, titling of assets with joint account owners and POD and TOD designations, along with knowing when and what type of trust to use, will help your heirs manage your estate and get accounts and possessions where you intend them to go. I am not an attorney, so I recommend you discuss your intentions with an attorney to determine what strategy is best in your situation.•

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Hahn is a certified financial planner and owner of WWA Planning and Investments in Columbus. She can be reached at 812-379-1120 or jalene@wwafp.com.

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