A lot of people think that estate planning is nothing more or less than the creation of a will. You can certainly use a simple will to state your final wishes, but in many cases, it is not the right choice.
When folks act without understanding all the facts, their loved ones pay the price in many instances. This definitely applies to the ancillary probate process.
One of the most widely held misconceptions about estate planning is the idea that everything is very simple when a will is used as an asset transfer vehicle. After you pass away, the executor that you name in the document will distribute your assets, and the matter is resolved quickly and easily.
In actuality, the estate administration process is not that simple. Under the laws of the state of Ohio, the executor is required to admit the will to probate. This is a legal process that takes place under the supervision of a court.
Creditors are notified about the passing of the decedent, and they are given time to come forward seeking payment. The executor will obtain an Employer Identification Number from the IRS so they can establish a bank account for the estate.
Final debts are paid while the estate is being probated, and this will include taxes. The executor will identify and inventory the assets, they will be prepared for distribution to the beneficiaries. This can involve appraisals and liquidation of property.
As you might imagine, all of this takes time. The exact duration will depend on the circumstances, but you are typically looking at about eight months at minimum. There have been complicated cases that have been stalled in probate for years.
Probate expenses include the executor’s remuneration, court costs, potential legal and accounting fees, appraisal charges, and liquidation fees. Another factor that is less than ideal is the loss of privacy because anyone that is interested can access probate records.
Probate is definitely a hassle for the rightful inheritors in most instances, and one probate process is more than enough. However, if you own property out of state, and you use a will to direct its transfer after your passing, ancillary probate would be necessary.
There would be a probate process here in Ohio, and there would be a separate probate process in the state that the property is located in. Aside from the procedural headache, the distance can present an additional problem for your loved ones.
Revocable Living Trust
You can steer clear of ancillary probate and the drawbacks of in-state probate if you take the right steps when you are planning your estate. A revocable living trust is an alternative to a simple will as an asset transfer vehicle, and you should certainly explore this option.
If you establish a living trust, you will be the trustee while you are alive and well, so you will maintain control of the assets every step of the way. In the trust declaration, you name a successor trustee to handle the administration tasks after your passing.
When you are funding the trust, you can transfer property that is located in any state into it, so there would be consolidation of ownership. After your passing, the successor trustee that you name would distribute the assets to the beneficiaries outside of probate.
This is one of the major benefits, and there are others. One of them is the ability to provide spendthrift protections. You can instruct the trustee to distribute limited assets over a number of years, so you have complete flexibility.
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