Estate Settlement Or Probate
Estate Settlement or Probate
Probates established through a court process with a valid will or without a will require the appointment of a personal representative, or executor, to administer and settle the estate. Settling estates can be an administrative nightmare.
Hawaii Fiduciary Services has developed processes to handle the multiple layers of administrative work. HFS has assembled a wide network of professionals and vendors to help with all aspects of settling an estate from changing locks to appraising and selling valuable art and antiques.
Hawaii Fiduciary Services uses a fiduciary accounting system to track income and expenses, and it conforms to the accounting required by the probate court. This back office structure makes HFS very effective handling a probate
Hawaii Fiduciary Services, through the experience of its Principal, has settled ancillary estates on the mainland and abroad in Asia, Europe, and Australia. Mainland trust companies and attorneys have also worked with the Principal to settle ancillary estates in Hawaii when their decedent had assets in Hawaii. This far-ranging experience makes HFS a seasoned choice as a personal representative.
Where there is family dissension and contested probates involving litigation, Hawaii Fiduciary Services offers an objective 3rd party choice. Having a professional executor helps neutralize family conflicts and minimizes the cost of protracted litigation. Our goal is to foster a higher level of trust among the beneficiaries and heirs knowing the estate will be settled fairly.
Hawaii Fiduciary Services can serve as a Special Administrator until a personal representative is appointed.
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A. What is the estate tax exemption amount in 2020?
As the estate tax exemption amount in the U.S. changes each year, you might be curious as to what the IRS announced as the estate tax exemption amount for 2020. The estate tax exemption amount is $11.58 million per individual in 2020, which is a marked increase from the $11.4 million estate tax exemption amount in 2019. This means that an individual will not have to pay any estate taxes if he/she does not leave over $11.58 million to heirs, while a married couple will not have to pay unless their total assets exceed $23.16 million.
What is the gift tax exemption amount in 2020?
The gift tax exemption amount in 2020 is $15,000 per individual annually, which is the same as 2019. Spouses can give up to $30,000 per year without paying any gift taxes.
What is the estate tax exemption amount in 2020 for foreigners?
For foreigners, the estate tax exemption amount in 2020 remains at $60,000. If the foreigner is from a country with which the U.S. has an estate tax treaty, he/she might be able to obtain a credit under the treaty, which might provide him/her with a higher estate tax exemption amount than $60,000.
Although it is difficult to gauge how much the estate tax exemption amount and other figures might change each year, it may be a good idea to review your estate plan in order to modify/tweak it so that it will accommodate any future changes that might take place in the future with respect to the estate tax exemption amount, etc.
A. How is the COVID-19 affecting the area of estate planning?
COVID-19 is affecting every area of our lives in a significant way. The pandemic is also spurring individuals and families to draft their estate planning documents or to review/amend already-existing document as they face the possibility of death from the novel COVID-19.
Despite social distancing requirements, can you still draft a Trust/Will?
Many legal documents require notarization, including a trust or will. Some states have issued an emergency order to permit remote online notarization due to the emergence of COVID-19, including Hawaii. Therefore, if you do not already have a trust or will in place, it is still possible to draft a Trust/Will at this time by meeting with your attorney and/or notary via Zoom to effectively execute your legal estate planning document by getting it notarized properly.
Should you draft any ancillary documents e.g. Durable Power of Attorney, etc.?
There are certain documents that your attorney may draft, together with your main estate planning documents such as a trust or a will. They include the Durable Power of Attorney (which allows an agent to act on your behalf with respect to financial transactions), and your Health Care Power of Attorney (which allows an agent to act on your behalf with respect to medical decisions). It may be wise to have your attorney prepare these ancillary documents in order to prepare for the event that you may become incapacitated from COVID-19.
If you have no estate planning document in place, now is a very good time to have one prepared. If you already have one in place, it is still a good time to review it and see if it needs some changes made to it.
A. The Impact of the Newly-Elected President on Estate Planning, etc.
The New President was Elected this Year
The new President of the United States was elected recently. President Biden may bring some changes to rules that may affect the area of Estate Planning.
New Estate Tax Rules for 2021
The IRS announced in October, 2020 that the Estate Tax Exemption Amount in 2021 will be 11.7 million dollars per individual. The Gift Tax will remain at $15,000 per individual in 2021. The Estate Tax Exemption Amount in 2021 for foreign individuals will remain at $60,000 per person.
What changes may be on the way?
The new President may make the following changes with respect to estate-related taxes:
- Repeal of the Step-up in Basis which can lead to an increase in Capital Gains Tax (*Step-up in Basis means that when property passes to an heir upon a death, the heir succeeds to the property at the market value of the property at the time of death and not at its original value when it was first purchased. The heir can then sell the property with minimal or no Capital Gains Tax, but this rule can be repealed under the new President's rule); and
- Decrease in the Estate Tax Exemption Amount.
- (It is not clear as to what degree the new President will decide to reduce the Estate Tax Exemption Amount, but there is talk that it may be reduced to as low as $3.5 million, which was the Estate Tax Exemption Amount in 2009.
It may be good to consider any changes that may take place under the new presidential rule and talk to professionals to consider gifting, etc. that may help reduce your estate tax obligations.
A. How to Prepare for 2021 with respect to Estate Planning
Keeping a record of your assets
As this is the new year, it is a good time to think about your estate planning if you have not done so already.
The first thing that you may do is to prepare a list of your assets and update this list every year. In the list, you can list out all of your real estate, bank accounts, financial accounts, etc. including information relevant to these assets such as the address at which your real estate is situated, and account numbers of any bank/financial accounts that you own, etc. After you prepare this list, you may share it with your family members to alert them as to the assets you own.
Many of my clients die without leaving a record of their assets which leaves their heirs to figure out what assets they owned during their lifetime. In many cases, heirs will have to give up on succeeding to certain assets of the deceased, as they are not able to locate such assets. Creating a list of assets and sharing them with your family members during your lifetime can make it easier for your heirs to locate your assets and succeed to them upon your death.
Preparing a trust, etc.
Once you prepare a list of your assets, you can hire an attorney to draft any of the following documents for you:
- A Trust;
- A Transfer on Death Deed (for real estate only); or
- A Will
You can also proceed with designating a beneficiary on your bank/financial accounts on a Payable-on-Death form, which will help you avoid probate. As it is often easy to procrastinate on preparing estate planning documents, 2021 can be the year to do it.
It is good to plan your estate planning at the beginning of the year and actually follow through with it while you can. Wish you all the best in year 2021!
A. How do you obtain an EIN number for your Estate?
What is an EIN number?
An EIN number is a nine-digit number assigned by the IRS, typically to business entities (e.g. corporation). However, an EIN number can also be assigned to an Estate or a Trust.
During a probate, one must typically take the EIN number for an Estate to a bank to open an Estate account for the deceased, as the deceased's account at the time he/she was alive, is no longer functional after death. For a Trust, one must obtain an EIN number for the Trust after the Trustor's death, because the Trust becomes a separate entity from the Trustor once the former dies, and the Trust requires its own unique identification number.
How do you obtain an EIN number?
One can obtain an EIN number by filing an application called the SS-4 with the IRS. If the deceased had a social security from the United States, the SS-4 can be filed via the online application. However, if the deceased died in a foreign country and did not have a social security number in the United States, one must file the SS-4 via fax or by mail to the IRS. One can obtain an EIN number quickly via the online application, but it takes more time to obtain the EIN number by fax or mail.
It is good to know that an EIN number does not only serve business entities, but also plays an important role when administering an estate or trust.
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A. Probate and Ways to Avoid it
What is probate and what can you do to avoid the probate process?
Probate is the legal court process by which a deceased person's estate is distributed to heirs. Probate goes through the court system and can take 1-3 years to complete and as such can be time-consuming, costly, and burdensome.
What documents can you prepare in order to avoid the probate process?
There are 2 ways to avoid probate:
1) Prepare a Trust during your lifetime
You can prepare a trust, which is a legal document that provides instructions on how and to whom assets will be distributed upon the trustor's death.
2) Prepare a Transfer on Death Deed during your lifetime
You can prepare a Transfer on Death Deed, which is a legal document that allows the owner of real estate to transfer title thereof to a beneficiary upon the owner's death.
As probate is costly and time-consuming, you may consider preparing a Trust or a Transfer on Death Deed during your lifetime to avoid probate at your death.
A. What is an Ancillary Probate?
As a recap, probate is the process by which the court distributes a deceased person's estate to heirs and designated beneficiaries and pays off any creditors. Generally, the primary probate proceeding is held in the state of residence of the deceased. However, an ancillary probate, or a secondary probate proceeding may be necessary if the deceased had any assets located in another state, e.g. a real estate titled in another state.
When is an Ancillary Probate initiated?
Generally, an ancillary probate is initiated after the primary probate has been opened. Upon the opening of a primary probate, the court will look into the validity of a will and names the executor/personal representative. If a will does not exist, the court will initiate an intestate administration and appoint an executor/personal representative. Because a state probate court can exercise jurisdiction only on property that exists within the state, an ancillary probate may need to be initiated in another state if the deceased leaves any assets located in that secondary state.
In order to spare more legal fees for opening an ancillary probate and for the purpose of avoiding a complicated probate, you may take the following precautionary measures during your lifetime that help to avoid probate including: 1) Titling a real estate in Joint Tenancy or Tenancy by the Entirety; 2) Putting a property in a trust; or 3) Preparing a Transfer on Death Deed for a real estate.
A. What Types of Probate are there?
There are two (2) types of probate available: Informal Probate and Formal Probate.
What is Informal Probate?
An informal probate allows an estate to be probated without any court involvement and court hearings. An attorney who is hired to take care of the probate will file the decedent's death certificate and other documents needed to be filed for the probate, with a clerk at the probate court. The probate can be completed by filing all necessary documents with the probate court, without the probate judge having to step in to make any decisions for the probate. An informal probate works well in situations where the decedent dies in the United States and a death certificate is issued within the same country.
What is Formal Probate?
A formal probate is one in which an attorney who is hired to take care of the probate will file a petition for a hearing with the judge and the attorney will appear before a judge on a hearing date prescribed by the court. Formal probate is necessary when there is, for example, some type of dispute over the validity of the will, etc., that needs to be resolved by a probate judge. Formal probate works well for Japanese clients who pass away in Japan and their death is noted in the "Koseki," or "Family Register." A probate judge in Hawaii can exercise his/her own discretion in accepting death certificates from countries other than the United States and will often accept an English translation of the "Family Register" without requiring any documents to be apostilled.
It is good to understand the different types of probate that are available to know which one should be used for the death of your loved one.
A. Can a Foreign Will be Probated in Hawaii court?
When a foreign national passes away and leaves a will drafted in a country other than the United States, he may want such foreign will to be probated in Hawaii court, such that his assets will be distributed to the beneficiary(s) under his foreign will.
Admissibility of a Foreign Will in Hawaii court
For practical purposes, a foreign will drafted in a country outside of the United States can be admitted in Hawaii court. A will from Japan, for example, will need to be translated into English before it is submitted for probate in Hawaii court. Further, the probate attorney will need to show that the will was validly executed under the laws of the foreign country in which it was executed. For example, for a Notarial Deed Will (Kosei Shosho Igon), which is a type of will drafted very often in Japan, the probate attorney in Hawaii will need to show that the will meets the requirements of a validly-executed Notarial Deed Will (Kosei Shosho Igon) under the Civil Code in Japan.
It is good to know that a foreign will can be admitted for probate in a U.S. court and therefore, a beneficiary of your choosing under the foreign will can succeed to your assets.
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