The Swier Law Firm Estate Planning and Probate Law FAQs

Many people believe that the term “estate” only applies to the wealthy.  However, in reality, almost everyone has an “estate.”  Your estate is all of your property – your home, real estate, savings, bank accounts, life insurance policies, furniture, retirement plans, personal property and everything else you own.  In other words, if you own property, you have an estate.

Your entire estate is made up of your probate estate and your non-probate estate.  If you die with a will, you have died testate. If you die without a will, you have died intestate. 

In South Dakota, probate is the process of proving a will’s validity before the state circuit court.  Probate is done so that your assets can be properly administered and distributed.  You should keep in mind that even if you die intestate (without a will), your assets still need to be administered and distributed through probate.  

The assets that go through probate make up your probate estate.  These are usually assets that are titled solely in your name and come under the control of your personal representative (formerly known as an executor).  For instance, real estate, stocks and bonds, bank accounts, and vehicles are part of your probate estate if they are titled only in your name.  

On the other hand, when you die, some of the assets that you own may be distributed to others without regard to your will and outside of the probate process.  These assets pass directly by operation of law or by contract and make up your non-probate estate.  For example, an asset that you own jointly with another person (such as real estate or a bank account) may pass directly to the surviving joint owner upon your death by special legal rules.

Other types of non-probate assets, such as life insurance or retirement accounts, allow you to designate a beneficiary.  These assets will then be distributed to your beneficiary when you die.  In other words, some of your assets may not be controlled by your will or the probate process.

The answer varies for each estate. The most important factors are often how many personal representatives and beneficiaries are involved and what type of assets does the estate hold?  The more personal representatives and beneficiaries, the more likely there is to be a dispute and or a lengthy court process. Generally, most probates that our law firm helps to administer are closed within 6 to 12 months. 

Once you're worth more than a certain amount, taxes "shrink" your estate.  Under the 2010 tax law, you can transfer up to $5 million tax-free during your life or at death.  This figure, called the basic exclusion amount, is also adjusted for inflation.  In 2012, this amount was raised to $5.12 million per person.  The new tax law does not change how much you can pass tax-free. On Jan. 11, 2013, the IRS announced that, with the inflation adjustment, the estate tax exclusion amount for deaths in 2013 would be $5.25 million. 

A trust agreement in South Dakota is a document that sets out the rules that you want followed for property held in trust for your beneficiaries. Common objectives for creating trusts are to reduce the estate tax liability, to avoid probate, and to protect property in your estate.

Think of a trust as a special box in which ordinary property from your estate goes in and, as the result of some type of transformation that occurs, takes on a new identity and often is bestowed with super powers: immunity from estate taxes, resistance to probate, and so on.

Suppose that you want to set up a trust. Just like with a baking recipe, you need to make sure you have everything you need before you start. To create up a trust, you need these basic ingredients:

• Person setting up the trust. The person is commonly known as the trustor, though you may sometimes see the terms settlor or grantor.

• Objective of the trust. You use different types of trusts to achieve a variety of specific estate-planning objectives. You can use some trusts for a single estate-planning objective, while others help you achieve more than one goal.

• Specific kind of trust. Trusts come in many different varieties. Regardless, when you’re setting up a trust, you need to decide what type of trust you want and make sure that you follow all the rules for that particular type of trust to make sure that it’s proper and legal, and carries out your intentions.

• Property. After you place property into a trust, that property is formally known as trust property.

• Beneficiary. Just like with other aspects of your estate plan (your will, for example), a trust’s beneficiary (or, if more than one, beneficiaries) benefits from the trust in some way, usually because the person or institution will eventually receive some or all of the property that was placed into trust.

• Trustee. The person in charge of the trust is known as the trustee. The trustee needs to understand the rules for the type of trust he is managing to make sure everything in the trust stays in working order.

• Rules. Finally, some of the rules that must be followed are inherently part of the type of trust used, while other rules depend on what is specified in the trust agreement.

No, there is an unlimited deduction from federal estate and gift tax that postpones the tax on assets inherited from one spouse until the second spouse dies.  However, this marital deduction applies only if the inheriting spouse is a United States citizen.