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Probate and Taxes and Fees, oh my!

Picture this for a brief second. We are all mid movie and a beloved character has tragically passed. What happens next? Everyone knows the answer. The family goes to some unknown attorney’s office to “read the will”. They all act surprised and furious when they are cut out of the decedent’s estate, the bulk of which went to charity and a beloved tabby. But is this an accurate construct in the real world? Keep reading for an explanation of why this is all Hollywood drama. Do not confuse this with meaning there might not be drama in what is better known as the probate process, but this is a preview of what to expect when a loved one dies. 

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The scene described above in some ways describes an estate set up by a Trust. Those who die with an estate plan based on a will (testate in the legal world) are required to go through a process known as probating the will. For lack of better terms, filing a will with Register of Wills and petition for probate with the Orphans’ Court opens an action against the decedents’ estate so that their debts can be settled and remaining assets disbursed. Upon filing the petition, the court will grant Letters Testamentary enabling the listed executor/executrix within the will to begin gathering assets and acting on behalf of the estate.  At this point a whole list of beneficiaries, creditors, heirs, and even the public are given notice by the executor that probate is underway. 

After clearing these initial hurdles, the executor/executrix will focus on valuing all estate assets for a basis from which to settle debts and pay taxes. Tax situations vary by estate, but most can plan on paying a PA inheritance tax for any transfer that is not between spouses or children under 21. Federal inheritance taxes are more difficult to pin down because they change periodically based on the party in control. There are ways to plan for these changes, should an estate value project out that high. This is one of many reasons to develop a plan that can change to meet your needs as these changes occur. Once the assets are valued and both creditors and taxes are paid, the executor/executrix can prepare a final accounting and distribute the estate. 

Sure a will costs less up front than some other estate planning methods, it might cost the family more in the end through taxes and attorney fees. These fees vary from .5% to 7% based on estate size. Also, worth consideration is the emotional toll the probate process will have on some. Trusts offer a viable alternative but cost significantly more to establish.  They do, in many cases, avoid the probate process all together. One thing is certain; neither provides a way to completely avoid estate taxes. At The Skeen Firm we are ready to help you decide which plan makes sense for your situation and provide custom tailored solutions. Contact us today at 724-550-6970 or info@theskeenfirm.com to get started on your plan!

*Disclaimer: the advice provided is for informational purposes and is not intended as legal advice.  It should not be relied on, nor construed as creating an attorney-client relationship.