What Exactly Is An Estate?
You might have heard of an estate planning attorney, or of an estate plan.
What exactly is an Estate?
People tend to believe that an “Estate” is comprised of all the assets they own.
Your estate is nothing more than your house, your cars and your money –everything you see on a monopoly board. However, it also includes your investment accounts, your IRAs, your stocks and your bonds.
Your estate also includes all of your personal belongings in your house. Yes, that means your estate includes your computers, jewelry, pianos, antiques, and cars.
We call these items hidden gems, because they can significantly increase the value of your estate.
There are many different types of estates which are discussed below:
A Probate estate deals with assets that pass under a will, or those that pass by intestate succession, where there is no will.
These assets have to go through a probate process, which basically means that they have to go through a court process in order to transfer the assets to the inheritors.
Fees for a Probate Estate are calculated on the gross estate. That means that if you have a $1,000,000 home and it has an $800,000 mortgage on the house, then your fees are calculated on $1,000,000, not $200,000! Pretty unbelievable!
Don’t let poor estate planning be the reason your family pays more money than they should when you pass away. Be prepared and sign up for a strategy session today, by clicking this link.
Gross Estate is calculated on the entire estate without considering debts and loans. Your gross estate can be much higher than your net estate.
The IRS can use the gross estate for another calculation – when the IRS wants to know whether the deceased’s estate is subject to estate tax. Thus, they want to know the value of all the property owned, in order to determine the estate tax to be paid.
A trust estate refers to all assets inside any trust to be passed to the trust beneficiaries.
Fees for moving the Trust Estate are usually calculated on the net assets, not gross like in Probate.
Your net assets are everything you own minus your liabilities. Your liabilities are everything you owe to other people, such as your mortgage. So, you subtract the mortgage from the gross estate to get your net assets.
Estate Planning to Avoid Fees
Estate planning is actually comprised of these six different types of law — probate, civil, tax, trust, debtor-creditor, and Medicaid. All of these laws essentially together make up the estate planning world.
So, what do we see when people try to navigate this by themselves or forget to do proper estate planning? Well, the courts and attorneys get most of the estate.
One way to avoid extravagant costs when you die is to make sure that you do not use the “gross” estate calculation when determining your fees. If you do not plan properly, you will not have a choice.
Don’t let poor estate planning create a dent in what should rightfully go to the children. Be prepared by discovering the appropriate course of action for your family by scheduling a strategy session today.