There are three scenarios upon the passing of an individual:
- With a Trust;
- With a Will;
- No Trust or Will.
Whatever the scenario, there are additional post death administrative tasks to handle.
Passing With a Trust
The most efficient and secure succession setup and mechanism is to have a Trust.
One major benefit is that it bypasses the need for Probate Court (more specifically explained below).
Of importance is understanding that assets have to be transferred into Trust before death and out of Trust after death.
Equally important is the before and after tax planning and management of the assets.
Common Post Death Trust Administration tasks include:
- Inventorying, valuing, and managing trust assets;
- Satisfying or resolving debts (e.g. mortgages, utilities, credit cards, auto loans..etc.);
- Filing Tax Returns (sometimes outsourced to a CPA);
- Trust asset distribution (including sub-trust funding if applicable);
- Collecting and distributing assets outside of Trust where applicable.
Another Trust advantage is when a beneficiary is a Non-Resident Foreigner, bypassing delays, verification, and tax withholding by financial institutions or third parties.
Passing With a Will or No Will
Probate Court is required if you pass with a Will or No Will (“Intestate) and there is an asset worth more than $150,000.00 for which there is otherwise no succession mechanism (e.g. beneficiary designations).
For assets below $150,000.00 those items can be collected by an out of court small estates procedure on behalf of the successors-in-interest.
The Schedule of Probate Fees is as follows:
• 4% of the first 100,000 of the gross value of the probate estate
• 3% of the next $100,000
• 2% of the next $800,000
• 1% of the next $9 million
Both the executor (individual nominated in the Will) or administrator (individual appointed by the court) and the attorney are entitled to this fee. Thus, the Probate Fees when multiplied by two (2) can become costly when compared to a Trust setup where the settlor (person establish the trust) gets to set the Trustee fee according to her or his preference.
The executor or administrator will essentially handle the same functions as the Trustee but under court supervision and approval.
Another consideration and possible drawback includes the time lag for completing the Probate process, which could be anywhere from 1 year to 3 years.