San Diego Estate Planning Lawyer Blog
You hear the term “estate” used alot in the context of estate planning but there are many variations: gross estate, net estate, probate estate, non-probate estate, trust estate. How do all these terms differ?
The value of your estate at the time of death is called your “gross estate”. This includes cash, bonds, stocks, real property, IRAs, pension benefits, life insurance, other investments, personal property, business interests, and any other assets owned. It is without consideration of debt that may be owned or taxes that need to be paid. It is your gross estate that determines whether there will be any estate tax that has to be paid. 2010 is an interesting year however because during this year, there is no federal estate tax whatsoever, regardless of the value of your estate. Unless Congress acts before 2011 to change it, the estate tax is set to return to a level of $1 million in 2011. This means that estates valued in excess of $1 million will be subject to estate tax.
“Net estate” is the value of your estate once all the expenses have been deducted such as funeral expenses, trust or probate administration expenses, taxes, and debts. It is the “net estate” that is distributed to your heirs or beneficiaries.
If you have a will, your “probate estate” consists of the assets held in your name at death that do not have a beneficiary designated. It is all of the assets that you own that will be subject to probate and distributed to your beneficiaries by your executor. If you don’t have a will, you die “intestate” and there will also have to be a probate to distribute all of the assets that do not have beneficiary designations.
A “non-probate” estate is the assets that you own jointly with another person, or that have a beneficiary such as life insurance, or an IRA.
Another estate term to remember is your “trust estate”. These are the assets you own at death that are in the revocable living trust you have created,ie. they have been transferred into the name of your trust.
If you are thoroughly confused with all this “estate” jargon, feel free to give us a call at Scott C. Soady, A Professional Corporation. We can help you understand the various concepts and make sure that your “estate”, whatever it is, will be distributed to your heirs and beneficiaries in the way that corresponds with your wishes.