What is your Estate?
When thinking of how much your Estate is worth, you likely look at your available cash on hand and maybe the value of your house. When discussing an implication of Estate Taxes or “Death Tax,” you probably do not think that your Estate will be subject to taxes since the value of your bank accounts does not reach the threshold. For tax purposes, your Estate’s total value determines whether you will owe any Estate taxes. If your Estate is over the tax threshold, that amount will be subject to taxation. Your Estate is the total financial valuation of your assets, including all your cash, investments, insurance policies, annuities, physical and intangible assets, real property, and personal properties.
When you pass away, your Estate will need to be handled by your loved ones and a calculation of the total value of the Estate for tax purposes.
An Estate consists of three categories: Probate Assets, Non-Probate Assets, Non-Estate Assets.
1. Probate Assets
Generally, Probate Assets are assets that have to pass through the probate court to be distributed in the event someone passes away without the proper estate planning.
Types of Probate Assets
- Separate Property
- Tenants in Common
- Community Property
- Property not held in Trust
- Real Property
- Bank Accounts
2. Non-Probate Assets
Non-Probate Assets are accounts and assets where you can assign a beneficiary. These assets will pass to the person named as beneficiary and will not go through probate to be distributed. Additionally, assets passed through a Trust are Non-Probate Assets. Through the usage of a Living Trust, the Probate Assets described above can be titled into the Trust and become Non-Probate Assets, thereby bypassing the Probate Court upon your passing.
Types of Non-Probate Assets
- Life Insurance
- Annuities
- Transfer on Death
- IRAs/Pension Plans
- Revocable Trusts
- Joint Property
3. Non-Estate Assets
Non-Estate Assets are outside of your Estate and will not be considered for the Estate Taxes. These assets are not included in the calculation for Estate Taxes.
Types of Non-Estate Assets
- Irrevocable Life Insurance Trusts
- Annual Gift Exclusion
The best way to transfer probate assets without going through the Probate Court is through a Revocable Living Trust. The process of a Trust will change the title on the assets to the Trust and, by doing so, will allow for faster and more efficient distribution to your heirs. Additionally, through a Trust, with proper tax planning, it is a possibility to avoid or mitigate the amount of taxes your Estate may owe.
About the Law Office of Zachary B. Whitman
Zachary B. Whitman is licensed to practice law in California. Information presented on US laws. This article is legal information and should not be seen as legal advice. The opinions contained herein are those of Zachary B. Whitman and not of any other organization. The information contained herein does not create an attorney-client relationship nor a requirement that Zachary B. Whitman take you on as a client.
