Death, planning and Community Property
None of this information is provided to serve as any type of advice, legal or not. Please seek help from your estate planning attorney when developing trusts or doing any form of estate planning.
Probate is the process completed when a decedent leaves assets to distribute, such as bank accounts, real estate, and financial investments to inheritors. Probate is the general administration of a deceased person's will or the estate of a deceased person without a will.
A proceeding is usually essential when a deceased person’s remaining estate is of high value even when there is a will.
Individuals can avoid exorbitant probate costs and complexities by having an easily authenticated will or using investment vehicles that do not require probate.
Common assets that generally don't go through probate include: Retirement and pension accounts that have beneficiaries, proceeds of life insurance policies, payable-on-death accounts, real estate co-owned with a joint tenant who has a right of survivorship, assets held in trusts
Death of Spouse:
A common misconception is that a surviving spouse does not have to go through the probate process. The truth is that no such automatic transfer occurs. This is due to the fact that a deceased spouse is free to leave his or her property to anyone desired.
If you die with a spouse but without a will, the amount your spouse inherits partially depends on how much of the decedent’s property was community property, and how much was separate property. Community property is property you got while you were married, and separate property is property you got before you were married. However, gifts and inheritances given to one of the spouses counts as separate property, even if they are given during your marriage.
If you die with a surviving spouse, but no parents or descendants, your spouse inherits everything. If you have a surviving spouse and parents, but no descendants, the surviving spouse will inherit all of your community property and half of your separate property. Your parents will then inherit the rest of the separate property.
If you and your spouse are legally separated, but not yet divorced, and you die intestate, your spouse will not be entitled to your property.
Letter of Testamentary:
A letter of testamentary is a document issued by a probate court that gives an executor the power to act in a fiduciary manner on behalf of the estate. You present the letter of testamentary along with the death certificate when you handle estate business to show that you have the authority to act on the estate's behalf.
A testamentary will, aka a traditional last will and testament, is a legal document used to transfer a person's assets to beneficiaries after death. To be valid, testamentary wills must contain certain language, indicating who is making the will and revoking all previous wills, and must be signed.
Although anyone can write a will, it's usually advisable to have a trust and estates lawyer draft or at least review it, to make sure it is worded correctly, precisely, and in accordance with state laws.
If you die intestate, a probate court decides the dispersal of your assets, based on state intestacy laws. Generally, assets go first to a surviving spouse and, if there is none, then to children, and then to more distant relations
A living trust is a legal arrangement established by an individual (the grantor) during their lifetime to protect their assets and direct their distribution after the grantor's death.
A living trust takes the form of a legal document. The document lays out the terms of the trust and the assets that the grantor assigns to it. A trustee is designated by the grantor as the individual (or entity) who, at a certain point, will control those assets for the benefit of the beneficiaries.
Living trusts can be either revocable or irrevocable, which differ in terms of tax treatment and flexibility. Individuals may prefer a living trust to a will because a living trust bypasses the probate process.
Irrevocable Trust is one that cannot be easily amended, changed, or terminated once it’s signed. The opposite of an irrevocable trust is a revocable one, which lets you freely make changes to it up until you die.
Estate tax benefit: Items and assets you put into an Irrevocable Trust do not add to the value of an estate. That means creating an Irrevocable Trust could be a financially smart move for anyone with a very large estate.
Asset protection: An Irrevocable Trust can protect assets from judgements and creditors. If you have a high-profile career or are otherwise likely subject to lawsuits, an Irrevocable Trust may be a good idea.
Your wealth can actually count against you when it comes time to collect government benefits like Medicare and Supplemental Security income. By putting assets into an Irrevocable Trust, you may not have to deplete your savings and assets before qualifying for assistance. This can be huge in preserving wealth for your heirs.
How to put someone on title:
There are many situations in which current property owners want to add a new owner without giving up their own interest. This often occurs after a marriage, when the spouse that owned the property before the marriage wants to add the new spouse to the deed. It also occurs when parents want to add a child to a deed in order to create survivorship rights or otherwise give the child an interest in the property.
Adding a new owner requires a deed to the property. The deed must be from the current owner or owners to both the current owner or owners and the person that will be added to the title.
When you add someone to the deed, all or a portion of your ownership is transferred to that person. Once it's done, you can't take it back unless the person you've added provides consent to be removed from the deed. He or she can take out a loan on the property, tear it down, or even sell their share of the property. And in some cases, there's nothing you can do about it.
Adding someone to the deed does not make them responsible for the debt. Unless the original loan agreement is modified, you are still solely responsible for repayment and the other person has ownership rights.
Let's say you decide to add your brother to the deed. If he fails to pay taxes and incurs a tax lien, has problems with creditors, or goes through a nasty divorce, the IRS, his creditors, or his ex-spouse can lay claim to your home, or at least to his portion. In that situation, the entity owed can place a lien on your property and attempt to force a sale to collect the debt or tie up the property and prevent you from selling.
Real property into a trust:
A property trust is a legal entity that allows property to be passed from the person who created the trust (the grantor) to the person they want to inherit their property (the beneficiary). A trustee oversees the trust and manages the assets in the trust on behalf of the beneficiary, according to the grantor’s instructions.
The main benefit of putting your house in a trust is to bypass probate when you pass away. All your other assets, regardless of whether you have a will, will go through the probate process.
There are two primary categories of trusts used in real estate: revocable and irrevocable.