Probating a will can turn into a drawn-out process, and unfortunately, you can’t always avoid multiple probate processes. When a person dies and leaves property in one state to someone in a different state, it is typically necessary to obtain probate for each jurisdiction.
On the other hand, if you plan ahead and take care to organize your properties with your estate in mind, you may be able to sidestep some of these nuisances. But why is there an added layer of complication? Ultimately, this comes down to the fact that the rules may differ from one state to another. The probate court in the state where the person lived is known as the domiciliary probate, and this is the state that has jurisdiction over the majority of the assets.
On the other hand, certain property — namely homes, land, tangible property, cars and boats as well as livestock, oil, gas or mineral rights — is governed by the laws of the state in which the property is located. Suppose, for example, that Sally lives and works in New York state for most of the year. At the same time, she maintains a small house in northern New Hampshire, which she utilizes as a retreat from the heat during the hot summer months.
On this same property, she also keeps a boat that is registered in New Hampshire, which she uses on a nearby lake. When Sally dies in New York, her domiciliary probate will be New York, while the summer house and the boat will come under New Hampshire jurisdiction as part of the ancillary probate.
Time and money
Certain shortcuts can make matters easier. In some places, out-of-state executors may be excused from obtaining letters testamentary from a court in the secondary state. In other words, the secondary court may recognize the letters, which are the official documents that confirm executorship. If the executors have already been authorized in the domiciliary state, they can proceed directly to filing both the letters and a copy of the will.
From here, the ancillary probate will start to cost a significant amount of money. The probate will require outlays for court fees, accountants and local attorneys. Even with the benefit of an abbreviated proceeding, the legal fees can reach upwards of several thousand dollars, all of which will whittle down the estate.
More months will go by as the process continues to drag on, and the estate cannot be settled until all the ancillary proceedings are put to rest. Paperwork will also pile up in most cases, particularly if more creditors need to be addressed. Estate taxes may be payable in each of the states, which will likely necessitate professional accounting.
In the event of intestacy, a situation in which a valid will does not exist, another host of problems will likely arise. Typically speaking, a surviving spouse will inherit half of an intestate estate, with the remainder being split among the closest living relatives. Even so, intestacy rules may vary from one state to the next, meaning that out-of-state real estate might end up being passed along to unintended family members.
Caveat executor! If you are asked to serve as an executor, be sure to ask about assets in other locations before you bite off more than you expected to chew.
Are there workarounds?
Three standard solutions can help you avoid ancillaries or any other probates.
Joint tenancy with right of survivorship: You can retitle property with joint ownership. However, if you later change your mind and you ultimately decide to revoke the joint tenancy, all other owners must be in agreement with your decision.
Revocable living trust: The deed that designates the trust as legal owner of the property is recorded in the county where the property is located.
Transfer on death or other beneficiary deeds: In about 28 states, named beneficiaries only need to record an affidavit with the county clerk after your death.
Different distinctions and formalities will apply in each state, as every state has its own set of requirements. Make sure you take the time to discuss your options with an estate attorney to better understand how these details will affect you and your property, no matter where you are situated.
You are heir to a house — hurray! But wait! There’s a mortgage on the property. What are your options? You have three options in this situation, two of which are relatively simple: You can sell it to pay off the mortgage and keep the rest of the money as your inheritance or you can keep it and pay off the mortgage with a lump-sum payment.
The third option is more complex, although not nearly as complex as financing a home on your own. You can take over the loan and become responsible for the mortgage payments. You do not have to go through an application process to do this. As an heir, you can be named the borrower without having to go through the normal loan approval process, which would require you to get your own financing.
Many wills contain standard language requiring all debts to be paid at death. This does not normally include any mortgage held by the decedent, but the provisions can be complex and there may be exceptions. Work with qualified professionals to make sure the law applies in your situation.
Another common situation is inheriting a house with a reverse mortgage. You’ll need to pay off the reverse mortgage if you want to keep the property, although the heirs often just sell the property to pay off the reverse mortgage and keep what’s left over.
What’s right for you?
To be sure that you’re making the right decisions, start by figuring out both the home’s value and the outstanding mortgage. If you inherited the home along with other heirs, all the homeowners should get together to discuss options. Would everyone be happy keeping the home as a rental or vacation property? Or do one or more heirs want to get the equity out of it without spending funds on the mortgage?
What if the mortgage is more than you can afford? You can consider the possibility of refinancing at a lower rate and longer term if your credit and financial situation allows you to do so. After all, you may also have a mortgage on your primary residence.
There are other expenses you’ll need to take into account to make sure keeping the house is financially feasible:
Any renovations that might be necessary.
Yard upkeep.
Roof and exterior maintenance.
Replacing or repairing appliances and other systems in the house.
Property taxes.
Heating and air conditioning.
Insurance.
On the other hand, there may be assets that go with the house, such as jewelry, art and furniture, that no one wants and that can be turned into cash to help pay off the mortgage. Once you’ve taken a full accounting of the finances, you’ll be in a better position to make a decision.
It is irresponsible enough that absent-minded parents occasionally manage to leave their children behind when they leave the park or get off the bus. Even so, it seems far more incomprehensible that parents could possibly forget to include one or more of their kids when they are in the process of drafting their wills and allocating their estates.
However, believe it or not, this happens often. Conscientious parents might draft their wills after the birth of a child or when the rest of their family is still relatively young.
But sometimes, another child will be born later on, and the parents will simply forget to update their wills after the fact. While it is not always a fatal omission or an intentional act, there are unlucky consequences that can arise as a result.
That said, many states will consider the child who was born later to be a beneficiary. This is because states will often revert to relevant intestacy rules, which are the default guidelines that govern situations where parents die without a will in the first place.
So, the courts have ways by which they can rectify an inadvertent omission or a clerical mistake. This should remedy the problem unless the wills left behind by parents have specifically excluded the omitted child on purpose.
How to leave a token bequest
Disinherited heirs may initially be shocked to find out that their parents left them either a very small amount of money or even nothing at all. Children may regard a situation such as this to be insulting, leading them to question the relationship they had with their deceased parent or guardian.
It makes sense to interpret such a situation as adding salt to the wound. Many estate lawyers suggest that testators leave at least a nominal amount of their estate to an heir whom they wish to cut off rather than simply failing to mention them by name.
At a bare minimum, this alternative offers some sort of closure to the child being excluded or omitted. That said, the bequest does not need to be in the form of money.
People often leave sentimental heirlooms with very little financial value as a gesture of affection. If you wish to bequeath your old, cracked teapot instead of allocating any of your money to your child, you could do just that while accomplishing the goal of including everyone in your will.
In all fairness, William Shakespeare left his wife his second-best bed in his will, and while beds were indeed much more valuable 400 years ago than they are today, the point still stands. You may also want to write a memo to yourself and state your decision to only leave a trivial amount to your child.
The document can serve to reinforce that your choice was not impulsive nor was it conceived as a result of external pressure. That said, be careful with your wording.
Try not to attempt to come across as being overly emotional or critical when drafting your justifications. If your will is ever challenged in the future, any circumstances you originally cited might no longer be true.
For example, if you describe your good-for-nothing son and state that he has never done a day of honest work in his life, he might be holding down a well-paid job when it comes time to challenge the contents of your will.
Less is more
While certain people will encourage testators to leave something small for all potential heirs, other experts will discourage people from even offering the tiniest of bequests. Those with this mindset would contend that it is more cost effective to merely acknowledge the relationship and leave it at that.
The real goal is to at least mention the disinherited person in a brief fashion so that you can address their existence while eliminating the possibility of them believing they were accidentally overlooked. Moreover, those who contest wills might latch onto situations, such as a one-dollar bequest, deeming it a cruel provocation that is out of character in regard to the testator.
For instance, the disinherited individual might use the minimal bequest as evidence of mental incapacity on the part of the testator. The less you give the disinherited individuals to work with, the more likely your requests will be upheld.
Another danger of leaving even a single dollar is that any amount of money will automatically make the child a beneficiary. Adding a beneficiary to the list can affect the protracted probate process.
Once you have officially transformed someone into a beneficiary of your estate, the executor will be obliged to distribute accounting documents, pleadings and administrative records to them as they must do for all beneficiaries. This costs money, and even the most mundane administrative tasks can take away from the estate’s assets while also delaying probate resolutions.
If you ultimately decide against a bequest, you can achieve similar results with the help of straightforward language. Your attorney can draft words to the effect that after thoughtful and careful consideration, you have decided not to include Junior.
There are a number of ways to phrase your intentions or state your preferences. For instance, you could include a clause such as “I am intentionally disinheriting Junior as well as Junior’s descendants for reasons I deem to be sufficient.”
It is always recommended you consult with a lawyer as you work to prepare your will. Seeking expert advice is imperative, especially if you are contemplating the idea of making a token bequest.
A premium tax credit is designed to lower the total cost of health insurance plans that are already relatively expensive in the United States. You can either apply the premium tax credit on a monthly basis to your insurance bill or choose to receive your premium tax credit in the form of a refund that is put toward your federal income taxes.
The premium tax credit is only an option if you purchased an insurance plan directly from a state or federal health insurance marketplace. Furthermore, eligibility for the tax credit is typically determined when you initially apply for your health insurance plan either through a state or federal health insurance marketplace.
The credit, which was originally implemented under the Affordable Care Act, exists for the sake of assisting eligible families and individuals with low or average incomes that find it difficult to afford health insurance on their own. Additionally, the amount of health insurance tax credits that are made available is dependent on a decision by the federal government.
This means the dollar value of the tax credits will be the same amount nationwide, no matter which state you call home. If you are interested in receiving this premium tax credit, you will need to meet certain requirements related to your income level and the number of people in your family and file a tax return alongside Form 8962: Premium Tax Credit.
If you decide to itemize your deductions in the Schedule A section of Form 1040, then you might be able to deduct any and all money that you put toward medical and dental care for yourself, your spouse and your dependents over the course of that taxable year.
That said, of your total medical expenses, you will only be able to deduct the amount that surpasses 7.5% of your total adjusted gross income. Additionally, another key detail to keep in mind is that people who sign up for catastrophic coverage automatically do not qualify for tax credits related to health insurance.
What is covered?
“Medical expenses” is a very broad term, but typically, these expenses will include any type of payment that has been put toward curing, diagnosing, mitigating, preventing or treating health-related concerns, ailments or diseases. Essentially, payments pertaining to any type of treatment that aims to heal, improve or care for the body are considered medical expenses in most cases.
In that line of thinking, medical expenses that can be deducted often include the following, though this list is not all inclusive:
Acupuncture.
Admission to receive medical care.
Chiropractors.
Contact lenses.
Crutches.
Dentists.
Doctors.
False teeth.
Glasses, both for reading and prescription-based lenses.
Hearing aids.
Inpatient care.
Insulin assistance.
Medical conferences.
Practitioners.
Prescriptions.
Psychiatrists.
Psychologists.
Rehabilitation centers.
Residential nursing homes.
Service animals.
Smoking cessation programs.
Surgeons.
Transportation related to medical care.
Weight loss programs.
Wheelchairs.
When considering which medical expenses can be deducted for the taxable year, you are only permitted to include medical expenses that you paid for during said taxable year. You are also required to reduce the total amount of deductible medical expenses for said taxable year by applying reimbursements that you received.
This is relevant whether you directly received the reimbursement yourself or the reimbursement was applied on your behalf to the total amount of medical expenses that you owe. If you are trying to figure out whether a specific expense of yours is deductible, refer to the official IRS website and contact a professional who has experience deducting medical expenses.
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