Have you been named as an executor for a loved one’s estate? As an executor your job is to organize and settle the affairs of your family member. Whether you have been named by a Last Will and Testament or by a court of law in the case of an estate without a Will, it is important to understand your duties.

Organize the Estate

The first step is to identify what the estate includes. Try to locate all estate documents. If you have been appointed by the court, you may not have to worry about this step since it may have already been determined that no estate documents exist.

If a Will does exist you should use it to list all beneficiaries. If no Will exists, heirs will be determined by state law. In either case, you will have to locate assets and debts on your own.

Probate the Estate

Once you have a general idea of the estate, you should meet with an attorney to begin probate. Probate is the court-supervised process by which you will settle the decedent’s affairs.

Every estate asset must be appraised for the date of death value. Next, with the help of an attorney, you must contact all known creditors. In case any creditors are unknown, you will place a notice in the local newspaper.

You will use estate funds to pay debts. If funds are not available, you may have to sell property. You will also be responsible for paying all taxes associated with the estate from its assets. You must file the final income tax return for the decedent, as well as the estate tax return if estate and inheritance taxes are applicable. You may wish to contact an accountant for assistance.

When all taxes and debts have been paid, the Court will order you to give the beneficiaries what remains of the estate. If there was no Last Will and Testament, your attorney can help you determine who the heirs at law are based upon the state intestacy laws.

It is very important to make sure all taxes and debts are paid and you receive a Court order before you hand out inheritances. If you do not, you will be financially responsible for unpaid debts and taxes.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

While probate is a common occurrence, most people would prefer to avoid that particular experience. Probate can be expensive, time-consuming and emotionally draining. And considering that probate occurs after you’ve lost a loved one, the last thing you want to do is spend time and money in court dissolving your family member’s estate.

Fortunately, a living trust can help you do just that.

With a living trust, all your assets are transferred into the name of the trust rather than being titled to you individually. This is important because when you pass on, any assets titled in your name are subject to probate. But assets in the name of the trust can be passed directly to your beneficiaries without court supervision.

How to Create A Living Trust

Because a trust is a separate legal entity, you’ll need a legal document known as a Declaration of Trust. Your estate planning attorney will help you prepare this important document. There are however, some things you’ll want to have figured out in advance:

• Your Trustee – Typically the person who created the trust (you) chooses to act as their own trustee, so that you have primary control over the assets you put into your trust. But you don’t have to be your own trustee and if you’re not sure, talk it over with your attorney to get a clear understanding of all your options.
• Funding the Trust - Once you’ve created your trust, you’ll then need to fund it so start thinking about what assets you want to use. Your house is a good one for example, but it might be easier to keep your car in your own name. Again, your attorney can give you guidance on which assets work best, but it certainly doesn’t hurt to start thinking about the assets in your estate now.
• Name Your Beneficiaries – Who will inherit after you’re gone? Make a list of the people or organizations that will inherit the assets and property owned by the trust after you die. Keep in mind that this will only cover the property and assets that are held by the trust; anything outside of the trust you would need to cover with a will.
• Name a Successor Trustee – This is the person that will become trustee after you die.

Having this kind of basic information mapped out is the first step to creating your own living trust. If you’d like more information about a living trust, contact our office today.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

2010 has been one strange year for the U.S. tax code. We have a huge estate tax issue that is still not fully resolved. Let’s take a look at where things stand for the estate tax year in terms of changes, amendments, additions and considerations.

The estate tax and GSTT have been repealed for 2010, but they may be enforced retroactively.

Even though the Obama administration preferred having an estate tax in 2010, Congress was preoccupied with other matters as 2009 drew to a close. So no action was taken, and as EGGTRA stipulated in 2001, the estate tax is 0% in 2010. [1]

So far, anyway. The longer we go with no action taken, the harder it gets for Congress to take action and put a retroactive estate tax in place. (You could easily argue that a retroactive estate tax would be unconstitutional.)

Of course, the estate tax and the generation-skipping transfer tax (GSTT) are scheduled to return in 2011. Congress may restore things to 2009 levels, $3.5 million exemption for estate tax and GSTT with 45% estate, GSTT, and gift tax rates. By doing nothing, though, estate taxes would reset to pre-EGGTRA levels in 2011 (the exemption level at just $1 million with 55% estate, GSTT, and gift tax rates). [1]

With no estate tax in place for 2010, the step-up basis rules have been replaced by carryover basis rules.

This year, assets in an estate are subject to capital gains taxes when sold based on the original price paid for the asset. This could mean some big problems for heirs if an asset was bought by Mom or Dad 20 or 30 years ago. Let’s say the asset is a stock. If Mom or Dad purchased shares off and on through the years, you’ll have quite an assignment to find that paper trail, and you may end up paying capital gains tax on the appreciation if the estate is really large. Fortunately, each estate can exempt $1.3 million of gains from the carryover basis rule, and another $3 million exemption applies to assets inherited from a spouse – so as much as $4.3 million of an estate, if transferred to a spouse, can retain the step-up in 2010. [2]

The federal gift tax rate is 35% for 2010, not 45%.

Yes, there is still a gift tax in 2010 on gifts above the lifetime exemption amount of $1 million. However, the tax bite is just 35% for 2010. Of course, if you end up gifting less than $1 million during your lifetime, you won’t have to worry about the gift tax at all but you will need to be sure to file a gift tax return.[3]

IRS CIRCULAR 230 DISCLOSURE: Tax advice contained in this communication (including any attachments) is neither intended nor written to be used, and cannot be used, to avoid penalties under the Internal Revenue Code or to promote, market or recommend to anyone a transaction or matter addressed in this communication.

[1]moneywatch.bnet.com/retirement-planning/article/estate-tax-what-you-need-to-know-for-2010/378294/ [1/5/10]

[2] articles.moneycentral.msn.com/RetirementandWills/PlanYourEstate/5bigMythsAboutTheEstateTax.aspx [4/14/10]

[3] moneywatch.bnet.com/retirement-planning/blog/financial-independence/why-is-everyone-afraid-of-the-gift-tax/843/ [4/14/10]

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

When a person passes away there are usually some bills to be paid by the estate. There might be medical bills, credit card bills or even purchases. If you have been named the Personal Representative of a loved one’s estate, then you’ll need to understand how you will tackle these bills. Of course, you’ll have the guidance of your attorney, but it’s good to have a basic understanding of how debt works when it comes to probate.

Pending payments for bills are known as debt in legal language. Comparing the amount of debt carried by an estate to the amount of estate assets tells you whether the estate is solvent or insolvent.

What is a Solvent Estate?

A solvent estate includes enough assets for paying off all bills. The assets are more than the total value of the bills. The Personal Representative is responsible for paying off the bills. At the end of probate, 12 – 18 months in CA, once all legitimate expenses are paid – including clearing all debt – then the assets are distributed to the beneficiaries. The Personal Representative has to ensure that the beneficiaries receive their share.

What is an Insolvent Estate?

In an insolvent estate, the assets are not enough for paying off all bills. When an estate is insolvent, then the Personal Representative has to list all bills in order of priority in accordance with state law. Your attorney can explain how to prioritize the bills. The assets would then be used to pay off bills – wholly or partially. Those bills that cannot be paid would have to be written off as bad debt. Beneficiaries are not responsible for paying off an estate’s debt.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

If someone close to you passes away, you need time to cope with the emotional stress. However, there are some practical decisions that you cannot ignore. These relate to the bills and other debts of the estate.

If you have been named Personal Representative then it is best to contact a good attorney to help you with the probate process and other legal formalities. However, here’s some basic information about organizing the debts of the estate as you prepare for the probate process.

One of the first things you’ll want to do before Probate begins is to make a list of liabilities of the person who has passed away. This list should include:

• Mortgages
• Lines of credit
• Condominium fees
• Property taxes
• Federal and state income taxes
• Car and boat loans
• Personal loans, including student loans
• Storage fees
• Loans against life insurance policies
• Loans against retirement accounts
• Credit card bills
• Utility bills
• Cell phone bills

After you have made a list of all the liabilities then divide them into expenses that will continue during the probate process and expenses that can be paid off.

Debts that you can clear fully during the Probate process are known as final bills. Administrative expenses like mortgages, condominium fees, property taxes, utility bills and storage fees, will have to be paid even when the Probate process is continuing.

Final bills include personal loans, income taxes, loans against life insurance and retirement accounts, cell phone bills, and credit card bills.

The Personal Representative has to deal with all these bills and wait 6-8 weeks before having access to the decedent’s funds, and for many of these, await Court approval to pay –the beneficiaries do not have to pay any of them.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

Every probate case has a probate judge. Depending up the speed of probate, you may never even meet this judge, but it’s important to understand his or her duties in the tricky probate process.

How intense the obligations of your probate judge are will depend upon the size of the probated estate, whether any aspect of the estate is contested, and if the deceased had a Last Will and Testament.

If there is a Will and all members of the family agree on probate issues then the judge’s duties may simply include signing basic probate orders. These orders will name the estate executor, who is likely already named in the Will. The probate orders will also allow probate to open, property to be appraised and sold or passed to beneficiaries and for the estate to close when all has settled.

When estate challenges occur, then a Judge will be more involved and actual court time may be required. In this case, the judge will listen to both sides and have a final say on the challenged issue. The probate judge may even be called to examine the performance of the estate executor.

So what if there is no Will? This can present a more complicated situation. In this case the biggest question is if the family members can agree who to appoint as administrator of the estate. If so, judicial probate duties may again be simply signing probate orders.

If, however, there is no Will and family members do not see eye-to-eye on estate matters, the probate judge will likely be very involved in the process. The judge will choose an estate administrator, likely a stranger, but will still have to keep a constant watch over probate happenings. This may require quite a bit of time in court, and this is the number one reason you should make a Last Will and Testament. Having the proper estate documents in place can make probate easier for every participant in the process, and may well save your loved ones time and money.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

Probate is a legal process that distributes the estate to the rightful heirs after a person’s death. The primary probate process covers property in the home state of the deceased while an ancillary probate process covers property in other states.

And, because each state has their own set of laws, the ancillary probate process may distribute property much differently than you expected. Needless to say, dealing with two probate proceedings can be time-consuming and cumbersome. A good estate planning attorney can advise you best on how to avoid ancillary probate, but here is a simple guide to help you with the basics.

• Since the probate process covers real property, you can re-title the out-of-state property in the name of a Revocable Living Trust. The property held by the Trust is transferred directly to the beneficiaries named in the Trust upon your death.
• People who are married can title the property in joint names with their spouse. The spouse would take control of the property through rights of survivorship and avoid the probate process. Keep in mind however, that this is a temporary fix – ancillary probate will still be required when the other spouse dies or in the unfortunate event that the both spouses die at the same time. This is not the best option if the spouses wish to leave their property to different individuals (like their separate children), or worry about a new spouse ultimately getting the property.

• If you are not married or wish to give the property to someone other than your spouse after death, you can still title the property jointly and give survivorship rights to the other person. Your attorney will advise you of the tax and other consequences of transferring property during your lifetime.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

Actor Gary Coleman died last week at age 42 after falling at his home. The memorial service that was planned for this past weekend was cancelled and his body remains in a Salt Lake mortuary. His estranged parents and ex-wife all asserted rights to make medical decisions for him, including funeral arrangements.

According to reports, his former agent says Mr. Coleman who was a Utah resident at the time of his death has a CA will from the 1990′s and his former co-star says he has new paperwork. No one has mentioned a Health Care Directive which would have easily named the person he wanted in charge. So the wait begins for the Court proceedings to start…and if for some reason, the Court finds both wills invalid, his estate can pass under the laws of intestacy to his parents from whom he was estranged for over 20 years…

While you wait to hear the latest, call your own estate attorney and make sure your plan is up-to-date!

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.