Overview of Giving Gifts of Inheritance to Heirs
Overview of Giving Gifts of Inheritance to Heirs
"Heirs" is the word for people entitled to an inheritance from a relative who has died. Legacy gifts can include real estate, financial portfolios, money, and personal items like jewelry, artwork, collectibles and furnishings.
Individuals designate heirs within their last will and testament. If a Will is not executed prior to death, gifts are distributed to heirs according to state probate law. When a Will is executed prior to death the estate is referred to as intestate. Without a Will, the estate is referred to as testate and requires extra time to undergo settlement proceedings.
All estates must undergo probate unless gifts of inheritance are transferred to a trust. Probate is a judicial process which is supervised through probate court. Although regulated by the Uniform Code of Probate, not all states use the same rules.
Some states require that all cases of intestate and testamentary probate undergo the approval process. Other states consider small estates valued below a certain amount to be exempt from the process.
When you die intestate, a personal representative is appointed through the court. Otherwise, the representative is appointed within the Will. This person is responsible for locating rightful heirs. The majority of probate personal representatives include members of the family such as the surviving spouse, parents, siblings, or adult children.
If the rightful heirs have disassociated from the family, but entitled to right of succession, the personal representative may find it necessary to obtain help from a private investigator or forensic genealogist. These costs are paid by the estate.
Once legal heirs are recognized, probate usually settles within 3 to 4 months. Much depends on the value of estate holdings, type of inheritance gifts, family dynamics, and workload of the court.
If all heirs agree to directives of the Will, the succession procedure begins. If one or more heirs challenge the Will, probate can be prolonged until lawyers are able to sort out the details of distribution. Engaging in estate planning can reduce the risk of having the Will challenged. This is especially important for those who choose to disinherit heirs.
When the Will is executed, you must include a clause stipulating that disinheritance is your personal choice. Otherwise, the disinherited can file a claim against the estate by contesting the Will or according to probate law.
Two types of assets can be bequeathed through the last Will and include Specific gifts and General gifts. Specific encompass personal property while General encompass items remaining after specific gifts are identified.
General gifts normally encompass the majority of estate assets. Heirs designated to receive these items are referred to as "principal heirs." Every Will must include at least one principal heir.
Certain types of property are not gifted through the Will. Instead, individuals assign beneficiaries to receive property upon death. These can include real estate held in joint tenancy, individual retirement accounts, investment portfolios, and property that has been setup using payable-on-death or transfer-on-death beneficiaries.
Heirs should consult with a tax attorney or estate planner to determine payable inheritance or estate taxes. Those receiving transfer-on-death proceeds may be able to engage in strategies to avoid paying taxes as long as account proceeds remain in place after being transferred.
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