Avoiding Probate

Probate.  Just mention the word, and chills run up the spine. Some businesses are even targeting seniors to scare them into purchasing expensive estate plans to avoid probate. They hold luncheon seminars telling seniors that a Will won’t avoid probate, and then try to sell the senior a Trust for thousands of dollars. Just because a person has a Will does not mean that probate will be required.  In many cases, there are other, less expensive options that would also avoid probate.

What is probate?

First, let’s define probate. Probate is a court proceeding to transfer assets and settle the debts of a deceased person.  At a minimum, a simple probate in Arizona takes at least 4 months to complete and can cost $1600 or more. A probate proceeding may also be opened if the Trustee of the deceased person’s Trust is not performing his or her duties, or if someone disagrees with part of the Trust.  

What is the best way to avoid probate?  

Stay alive.  Seriously, it depends.  Most Arizona real estate can be transferred with a Beneficiary Deed for less than $200.  That is substantially less than the cost of a simple probate.  If a person owns real estate in multiple states, it may be better to use a Trust to manage the transfer of property.  Depending on your unique situation, a Trust may be the best solution, or there may be other less expensive ways to transfer your assets upon death without a probate.

What type of assets require a probate to transfer?

In general, if property requires the signature of the owner to transfer title or access it, then it may require probate for transfer after death, unless a non-probate transfer device has been put in place before death.

What are some simple ways to transfer property without probate and without a Trust?

This table shows typical assets and ways to transfer without a probate. Some actions must be taken before death.

Property	Signature Required	Non-probate transfer options (MUST be done before death)	Small estate transfer options (After death)
Financial Account	Yes	Name a POD or TOD beneficiary	Affidavit of Collection if less than $50,000
Real Estate	Yes	Beneficiary Deed	Affidavit of Transfer of Real Property if less than $100,000
Motor Vehicle	Yes	Beneficiary Designation Form	Affidavit of collection if less than $50,000
Grandma’s Dishes	No	Give them to the person listed in the Will

How can I decide the best solution for my situation?

You can ask an attorney to decide for you, or you can get information from an estate planning professional like Prescott Tax & Paralegal and make your own decision about what is best for you.

Will having aTrust avoid probate?

Usually. However, if there is a disagreement over distribution, the Trustee acts improperly, or assets were not placed into Trust ownership, a probate may be opened. In a recent case, a probate was opened because the bank incorrectly titled the money market account as The Smith Trust instead of the The Smith Family Trust. When the original trustee died, the bank refused to release funds to the successor trustee because the name on the account did not match the name on the Trust document. The bank refused to pay for the proceeding, and refused to admit their error in incorrectly titling the account. Ultimately, we were able to obtain a court order forcing the bank to release the funds, but not without cost to the heirs was in time and money.

If you have questions about avoiding probate, estate planning, or how to transfer assets of a deceased loved one, call Prescott Tax & Paralegal at (928) 778-3113.

Small Business Owner New Year's Day To Do List

Prescott Tax & Paralegal wishes you a blessed and prosperous New Year!  As we begin a new year there are a few steps that small business owners should take to ensure that accurate income tax returns will be prepared.

1. Get the odometer reading from each vehicle used in business.

Most small business owners use their personal vehicles in for their business. On January 1 of each year, they should take a photo of the odometer, or write down the odometer reading of each vehicle used in the business. Having the odometer reading helps your tax professional determine the percentage of business use of the vehicle.

2. Start a new mileage log to keep track of business miles.

The IRS requires that a written mileage log be kept if you claim mileage for your business. Apps such as MileIQ or Everlance can be downloaded onto your smart phone to keep track of mileage. To have an acceptable mileage log, you must keep track of the date, miles driven, and business purpose. For example: 1/1/2019, 12.2 miles, to office supply to pick up W2 forms.

3. Determine if any contractors need to be issued a 1099Misc.

If a non-employee received compensation of $600 or more, the IRS requires you to issue that person a 1099Misc. To issue the 1099Misc, you will need: Name, Address, Social Security Number, and Total amount paid during 2018. If you need help preparing forms 1099Misc or determining who should receive them, contact your tax professional. These forms must be mailed to the contractor and the IRS by January 31.

4. Prepare and issue W2s for employees.

If you have employees, prepare and issue forms W2 for your employees, or have your payroll provider do this. Forms W2 must be mailed to the employee and the IRS by January 31.

5. Complete bookkeeping.

Many small business owners do their own bookkeeping using software or ledger sheets. Finish your bookkeeping early. There is no good reason to wait. Most small business owners should be filing the business tax return in January. If the business is a partnership, or s-corp, then the owners or shareholders can receive the necessary documents to complete their individual tax returns. If the business is sole proprietorship, the income tax return can be completed early in the season when your tax professional is at their best.

Will the government shutdown affect filing my income tax return?

Right now, we are told that there will not be any delay in "filing" income tax returns. However, REFUNDS WILL NOT BE ISSUED UNTIL THE GOVERNMENT SHUTDOWN CEASES. Please plan on that. There is nothing your tax professional can do to hurry the refund. No, you should not wait to file your income tax return until the government shutdown ceases. File as your normally would - as early as possible.