- Probate is the process by which a probate court distributes your assets after you die. It begins when a copy of your death certificate and your will are delivered to the probate court. The court will appoint an estate executor to manage your estate (normally the person named in your will for this position). Any heir who disputes his share under the will, who claims that he should have been named in the will or who might benefit from a particular interpretation of the wording of your will is entitled to attempt to establish his claim. Probate ends when the executor fully distributes the assets of your estate.
- For your will to be legally valid, you must have been mentally competent to understand its significance and contents at the time you signed it. Your signature must be witnessed by at least two witnesses (three in some states), and the witnesses must sign the will. The fact that a will contains ambiguous provisions ("My car to Susie," for example, when you have two cars) will not invalidate it as long as the court can reliably determine your intentions using external evidence.
- If you die without leaving a valid will --- by failing to write a will at all, for example, or by writing a will that is invalid because its signing was not witnessed --- your assets will be distributed according to state intestacy laws. Your property will be distributed among your relatives, with your spouse and minor children likely receiving most of it. If you have no living relatives at the time of your death, your property will belong to the state government.
- A living trust is a disposition of your property that takes effect after your death, but may continue after your death --- a monthly stipend to a relative, for example. To form a living trust, you must create a trust document that identifies assets that belong to the trust, appoint a trust administrator (often a lawyer or a bank), name beneficiaries and instruct the trust administrator on how to distribute trust assets. The trust will be revocable by you during your lifetime unless the trust document states otherwise. The main advantage of a living trust is that the assets will avoid probate after you die.
- Estate tax varies from year to year. For taxpayers dying in 2010, estates are taxed at a graduated rate, but only on the value of the estate that exceeds $5,000,000. The maximum estate tax rate is 35 percent. Estate income from the date of death until the probate process ends is also taxed, at individual income tax rates.
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