Many different people have an interest in seeing that as much of an estate’s property as possible passes to specific beneficiaries — those planning an estate, those who will serve as the personal representative of an estate, and those hoping to inherit from an estate. A thorough and well-considered estate plan is the first step toward maximizing the inheritance of someone’s selected beneficiaries and minimizing losses during the probate process.
There are several potential sources of liability that could diminish how much of someone’s legacy actually goes to their intended recipients. Learning about and avoiding those liabilities can make a big difference to the total value of someone’s final legacy.
Personal debts
Creditors ranging from the hospital that provides someone’s end-of-life care to their credit card companies can make claims that supersede the right of their beneficiaries to inherit from the estate. Creditor claims can even generate personal liability for the person serving as the representative of the estate, which means that they will usually wait until they have paid all known creditors and received claims from unknown creditors to distribute assets according to someone’s wishes.
Taxes
The representative of someone’s estate may need to pay a number of different taxes. While Texas does not collect an estate tax, the federal government does. If someone’s estate is worth more than $12,920,000, federal estate taxes may be due after they die. There could also be income taxes if the estate plan requires the sale of assets so that beneficiaries receive the proceeds from those sales.
Probate litigation
Family members and those who expect to inherit from an estate can sometimes challenge or contest testamentary documents or the actions of the personal representative. Probate litigation can take months to resolve and can cost tens of thousands of dollars. What people pass to their loved ones may shrink substantially if there is a fight over their testamentary documents or the conduct of the person administering the estate.
Understanding the concerns that may diminish someone’s legacy may help people better plan to avoid those financial challenges, and thereby maximize what they pass on to their loved ones when they die. Seeking legal guidance is a good place to start.