Heirs at Law: Estate Planning Definition

"HEIR" spelled out in block lettersWhen planning your estate, it’s important to consider who will inherit your assets after you’re gone. Specifically, it’s important to understand who are your heirs at law – and what that means if you pass away without drafting a last will and testament or a trust. Generally speaking, an heir at law is anyone who would be entitled to inherit from you if you were to die intestate. The rules for defining heirs at law vary by state. It’s important to understand what rights these individuals have when it comes to claiming a share of your estate.

Take advantage of the expertise of a financial advisor as you do your estate planning.

What Is the Meaning of Heirs In Law?

Heirs in law or heirs at law refers to anyone who has a legal right to inherit the assets of another person when that person dies without a last will and testament in place. In simple terms, heirs at law are the people who get your assets if you die intestate.

Every state has laws regarding intestacy. These laws dictate who can inherit your assets if you pass away without a legal will and how much of your estate each person is entitled to receive. If you die intestate and the state is unable to locate your heirs in law, then the state holds on to all of your assets until an heir comes forward.

Who Are Considered Legal Heirs?

Each state defines heirs at law differently. But generally, heirs in law follow a hierarchy starting with people who have the first right of inheritance. They’re followed by the people who have the next right of inheritance and so on.

Here’s what a typical order of inheritance may look like for someone who dies intestate:

  • Spouse
  • Children
  • Parents
  • Siblings
  • Nieces and nephews
  • Grandparents
  • Aunts and uncles
  • Cousins

This order assumes that the deceased person was married. If they were not married, then the probate court would look to their children next as heirs at law. If they had no children, then their parents would be next in line to inherit. If both of their parents are deceased, then their siblings would be the next heirs at law.

The probate court would continue generation by generation until they’re able to find someone who is the deceased person’s legal heir. But do stepchildren or foster children count as heirs at law? Typically no, unless they were formally adopted by the person who passed away. Common-law spouses and domestic partners may or may not be treated as heirs at law, depending on the laws of the state in which the couple lived.

States follow the intestacy laws for where the deceased person lived when determining heirs at law. It’s possible that some of your assets may be subject to another state’s rules in certain situations, however. If you lived in Massachusetts but owned a vacation home in Florida, for example, that property may be subject to Florida’s probate laws instead.

What Rights Do Heirs at Law Have?

Probate court hearing documents

If someone passes away without a will in place, the heirs at law have some important rights. First, they must be notified of the probate process. Probate is a court-supervised process of validating the will of a deceased person, known as a decedent. It involves identifying the person’s final assets, paying their last debts and distributing their estate’s property to the proper heirs.

The executor is in charge of overseeing this process. You can name an executor in a will but if you have no will, anyone can petition the probate court to become executor, including an heir at law.

Heirs at law also have the right to challenge the terms of a will if the deceased person does leave one behind. This may be necessary if an heir at law is excluded from someone’s will in violation of state probate laws.

So, say that you’re married but you’ve been separated from your spouse for several years. You draft a will leaving the entirety of your estate to your children. Since all state probate laws allow legal spouses the right to inherit, your estranged spouse could file a civil case to claim their share of assets. If the court agrees that they’ve been unfairly excluded from your estate, they can be awarded an amount that’s equivalent to what they’re entitled to under your state’s probate laws.

Who else can challenge a will? The short answer is that any heirs at will with legal standing could choose to do so. Again, if an heir believes they’ve been unfairly excluded they could raise an issue with the will in probate court.

How to Protect Heirs at Law

If you know who your heirs at law are, the easiest way to protect their inheritance rights is to draft a legal will. A will is a legal document that allows you to specify who you want to inherit your assets and which assets you want them to inherit. You can also use a will to name a legal guardian for minor children.

Drafting a will won’t supersede inheritance laws for certain heirs. For example, you can’t use a will to disinherit a spouse but you may be able to disinherit a child or another heir. If you’re ready to make a will you can do so with the help of an estate planning attorney. But it’s also possible to draft a will online using affordable will-making software.

You can take estate planning one step further by establishing a trust. A trust allows you to transfer assets to the control of a trustee who’s charged with managing them on behalf of one or more beneficiaries, according to your wishes. You might consider establishing a trust if you have a larger estate and you want to leave specific instructions for how assets are to be managed. Certain types of trusts may also yield tax benefits for estate planning. Talking to a financial advisor can help you decide if a trust is something you may need.

The Bottom Line

Man signing an estate planning documentHeirs at law is simply another way of referring to the people who could inherit your estate if you were to die without a will. Drafting a will can help your heirs to avoid legal and financial headaches after you pass away. And it’s also important to understand what your rights are as an heir at law if a family member should pass away.

Estate Planning Tips

  • When planning your estate, it’s important to consider any circumstances or situations that might lead to issues for your heirs. For example, say that you remarried after divorce. If your spouse has children, where will they fit into your estate plan alongside your own children? Or if you have a domestic partnership but are not married, how might that affect your partner’s ability to inherit? Talking with an estate planning attorney can help you to smooth the inheritance path for your heirs.
  • Consider talking to a financial advisor as well about the potential tax implications your heirs might face and how to minimize them through estate planning. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool makes it easy to connect with professional advisors in your local area. It takes just a few minutes to get your personalized advisor recommendations online.

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Debt After Death: 9 Things You Need to Know

An older man sits at a table on a laptop, surrounded by lush greenery.

DISCLAIMER. The information provided in this article does not, and is not intended to be, legal, financial or credit advice; instead, it is for general informational purposes only. 

Losing a loved one is hard on so many levels. Funeral arrangements and estate matters have to be dealt with in the midst of grief—and questions abound. What debts are forgiven at death, for instance? Can your family members’ creditors come after you now?

Technically, personal debts aren’t forgiven at death. Instead, they pass to the estate of the deceased person. We’ll explore what that means in practice in this post—and we’ll answer a few other questions along the way. The laws and rules can vary greatly from state to state, it is important to consult an attorney to help you navigate the process of how to handle the debts of a loved one after they have passed.

What Happens to Debt When You Die?

Personal debts created by the borrower themselves with no cosigning parties usually pass straight to the estate—unless the decedent was married and lived in a community property state. (We’ll cover what happens to debt in community property states a little later.)

Jointly held debts are a little different. Several different types of joint debt pass straight to cosigners without going through probate. Let’s take a closer look at five different types of debt to see what might occur after the primary borrower passes away.

Mortgage Debt

Joint mortgages pass directly to co-borrowers, who become responsible for the loan. Mortgages held by one borrower—i.e., the decedent—pass to listed beneficiaries, who then become responsible for the loan. If beneficiaries can’t or won’t assume the loan, they can sell the property to settle the debt instead.

If your loved one doesn’t have any beneficiaries listed on their will when they die, their mortgaged property may go into foreclosure. At that point, their bank will sell the property to recover the mortgage debt.

Car Loan Debt

Car loans held in joint names generally pass straight to the other borrower. If there is no cosigner and the estate is able to pay off the existing car loan, it will do so and then pass the car to the listed heir. If the estate cannot pay off the loan, the person who inherits the car can sell it to cover the debt. If you qualify for a car loan or you can pay their loan off in full, on the other hand, you can keep the vehicle. If no one is able to pay off the loan, the lender may repossess it.

Credit Card Debt 

Joint credit card debt passes straight to the other borrower. Credit cards with authorized users on them are different, however—unlike cosigners, authorized users aren’t responsible for debts. 

If your family member passes away with outstanding credit card debt, the lender may try to recover the debt from their estate. If there isn’t enough money left in the estate to cover those revolving debts, they’re usually simply written off. 

Student Loan Debt

Federal student loans and PLUS loans get discharged if borrowers pass away. Private student loans behave much like any other type of personal loan—if cosigners are involved, they’ll be liable for the debt. If there are no cosigners, student loan debt must be paid by the decedent’s estate—sometimes immediately.

Medical Debt

Medical debt can be more difficult to understand than other types of debt. If your family member died with medical debt, you may want to speak with a lawyer to understand what you are responsible for. For example, under a legal rule called the Doctrine of Necessities, in some areas, you may be responsible for your spouse’s medical debts if they are considered “necessary” expenses. This is true even if the bills are only in your spouse’s name and you did not sign for them.  Another exception would be in the case of a child—the child’s parents would remain responsible for the medical debt.

Many small medical debts are discharged when patients die. Larger medical debts, like other substantial debts, may become the responsibility of the deceased person’s estate.

9 Things to Know About Debt After Death

Assuming an estate is available to pay your loved one’s debts, here are ten things to know about debt after death.


These are the 9 things you need to know about debt after death.
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1. The Executor of the Estate Deals with the Debt

After your loved one passes away, direct any debt-related correspondence to the executor of their estate. As soon as the person dies, their estate is born—and along with it, an estate executor. Some people name executors before they pass away, but in other circumstances, executors are appointed by the courts.

Executors handle all financial issues relating to the deceased person’s estate, including debt payments. If you receive any unexpected mail from your loved one’s creditors, let the executor know right away.

2. Notify Creditors and Credit Bureaus

Creditors and credit bureaus need to know about your loved one’s death as soon as possible. This is another job for the executor of the estate. Here’s what the executor needs to do:

  • Notify all three credit bureaus—Equifax, Experian, and TransUnion—about the death, and ask that they place a “Deceased: Do not issue credit” notice on the person’s file to prevent identity theft.
  • Obtain a copy of the deceased person’s credit report to see what type of obligations they had.
  • Contact all the deceased person’s creditors to let them know that the individual has died.
  • Contact the Social Security Administration to make sure they note the person’s death.
  • Send copies of the deceased person’s death certificate to all three credit bureaus at the following addresses via certified mail:

TransUnion
P.O. Box 2000
Chester, PA 19022
800-916-8800

Experian
P.O. Box 2002
Allen, TX 75013
888-397-3742

Equifax
P.O. Box 740260
Atlanta, GA 30374
800-685-1111

3. Find Out Who’s Responsible

Before proceeding any further, make sure cosigners and joint borrowers are aware of your loved one’s death. Remember—responsibility for mortgages, credit cards, student loans, and other joint debts automatically pass to the surviving account holder. Joint responsibility doesn’t apply to additional cardholders or authorized users.

4. Stop Using Credit Accounts

Additional cardholders and authorized users must not charge anything new to the decedent’s accounts. Continuing to use cards associated with the deceased person after being informed of the person’s death could be considered fraud. At this stage, authorized users should apply for their own cards.

5. Keep the Estate Intact

Don’t distribute valuable possessions like jewelry and antiques yet. Settle debts first, and share any remaining physical assets afterwards. If you do distribute assets before sorting out debts, beneficiaries may end up being liable for those debts by proxy.

6. Negotiate with Creditors

If you’re a surviving partner and you’re having trouble paying joint debts after your spouse’s death, speak to your creditors. Many lenders are sympathetic and will work with you to ensure your credit stays intact. Explain your situation and tell them about any outstanding financial obligations and about any incoming life insurance money. 

7. Be Aware of Community Property States

In most states, surviving partners are not liable for their spouses’ personal debts. In community property states—Alaska (optional), Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin—however, they are. Surviving spouses in these states are responsible for their deceased partners’ debts, including any debts they didn’t know about. 

The community property stipulation only extends to debt accrued during the marriage. Debts accrued before the marriage are not community property debts. If you live in a community property state and need advice, contact a reputable probate attorney.

8. What Happens If There’s No Estate?

So, what happens to your debt if you die with no estate—or if your estate isn’t large enough to pay for it all? In short, the debt is written off. Without an estate to pay for it, it’s considered unrecoverable and is forgiven. 

9. If in Doubt, Contact an Attorney

We strive to provide information that’s accurate, but we’re not lawyers. If you’re confused and need advice, don’t hesitate to get in touch with a well-regarded consumer law or probate attorney. They’re not always cheap, but the service they provide can be priceless.

Preparing for Debts after Death

There are a couple of things you can do to make sure your outstanding debts are repaid quickly and efficiently after you pass away. First, create a clear legal will and name an executor. Then, consider bundling numerous small debts into one consolidation loan. Finally, think about buying a life insurance policy to cover any outstanding debts. All of these things can help make life easier for loved ones.

If you’re not sure how much you owe, sign up for ExtraCredit from Credit.com. The credit snapshot you receive can help you add up your financial obligations well before they become a burden.

Sign Up for ExtraCredit

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Charitable Trust vs. Foundation: Key Differences

The head of a foundationCharitable trusts and foundations can be used to both secure personal, family or business assets and enable philanthropic endeavors. Each one provides assets, such as securities, with protection from lawsuits and other claims. Trusts and foundations also can offer significant tax benefits as well as privacy. Charitable trusts are easier to set up and provide more privacy. Foundations are incorporated as separate legal entities. Many well-known charitable organizations are set up as foundations or charitable trusts. Here’s an overview of each one and how they compare.

A financial advisor can help you pick the most appropriate ways to do estate planning.

Charitable trusts and foundations can be funded with almost any type of asset. Funds may be provided by cash and bank accounts, stocks and other securities, homes and other real estate, proceeds from life insurance policies, business ownership interests and collectibles.

Charitable purposes are just two reasons to set up trusts and foundations. These tools can also be used to help with succession planning and business continuity, to protect minors and other vulnerable beneficiaries and to shield assets from divorce claims. The tax benefits and privacy benefits of trusts and foundations can apply to all these uses as well.

Foundation Basics

Collecting food for donations

A foundation is a private nonprofit organization devoted to charitable purposes. The cash, securities, real estate or other assets used to fund the foundation can come from an individual, a family or a business. Once assets are transferred to the foundation, they no longer belong to the founder or founders. A foundation charter lays out the purpose and intended activities of the foundation.

The assets in the foundation typically fund grants to other nonprofits. A board of directors decides which grants to give money to and otherwise oversees the activities of the foundation. Compared to charitable trusts, foundations may cost less, face less regulation and have more tax benefits.

The Internal Revenue Service recognizes private foundations as charitable organizations under the 501(c)3 chapter of the tax code. This makes the foundations exempt from federal income taxes. Individuals and corporations can get tax deductions by making contributions to private foundations. Private foundations may have to pay excise tax on net income from investments, however.

Charitable Trust Basics

A charitable trust gets created when a grantor gives a trustee title to some property or assets. Many types of trusts exist and other types, such as living trusts, are widely used for estate planning, wealth transfer and other purposes. The designated beneficiaries of charitable trusts may be particular groups of people, such as disabled veterans.  Charitable trusts have been around longer and are more widely used than foundations.

Unlike foundations, charitable trusts are not separate legal entities. Creating a trust requires filing no articles of incorporation or other documents with the secretary of state or other agency. Because of that, trusts are particularly good for maintaining privacy.

The document that organizes a trust is known as a trust deed. It describes the beneficiaries and instructs the trustee how to use the assets of the trust to benefit the designated beneficiaries. Trusts may award scholarships to individuals, grants to charitable organizations or otherwise use assets to help beneficiaries. The trustee decides how to use the assets in accordance with the trust deed, and the original grantor may have limited ability to direct the trust’s actions.

Like foundations, contributions to charitable trusts can be deducted for income tax purposes by individuals and businesses. The IRS otherwise treats charitable trusts like foundations, requiring them to pay excise taxes on investment income, unless the charitable trust is classified as a public charity.

Bottom Line

Little girl holding a "thank you" signCharitable trusts and foundations both provide asset protection, tax benefits and privacy to wealthy individuals, families and businesses. They can be used in estate and succession planning and as a way to support selected causes and charities using assets transferred from an individual, family or business. Trusts are easier to set up and don’t have a separate legal existence. Foundations are organized as separate legal entities and require filing articles with the secretary of state of the relevant jurisdiction.

Tips on Estate Planning

  • A qualified and experienced financial advisor can assist you in evaluating your unique situation when making the decision between a charitable trust and a foundation. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you’re concerned with the impact of taxes on your retirement income, you may want to consider where you spend your golden years. Check out our rundown of the most tax-friendly states for retirees.
  • Consider a charitable remainder trust. It’s an irrevocable trust to which you contribute assets. You or a chosen beneficiary can then use the resulting stream of income. The remainder of the funds go to charity or charities of your choice. Placing assets in a charitable remainder trust reduces your individual taxable income.

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How a Non-Grantor Trust Works

Trust and estate planning documents

One of the most useful estate planning tools is a trust, which can be used to create a legacy of wealth and protecting assets. One question to consider when creating one is whether a grantor or non grantor trust is more appropriate. A non grantor trust is any trust that is not a grantor trust. That distinction may seem simplistic but it matters from a tax perspective when shaping an estate plan. Understanding the difference between the two is important when deciding which type of trust to form.

Estate planning can be complicated so working with a financial planner can help ensure your arrangements best suit you and your beneficiaries.

What Is a Non Grantor Trust?

To understand non grantor trusts it’s helpful to have some background on what a grantor trust is and how it works. A grantor trust allows the grantor, i.e. the person creating the trust, to maintain certain powers of the trust. For example, that might include the power to:

  • Revoke the trust
  • Substitute assets in the trust
  • Borrow from the trust without providing collateral or security
  • Distribute trust income to oneself or to a spouse
  • Add or remove beneficiaries from the trust

Regardless of the scope of powers involved, what’s unique about grantor trusts is their tax treatment. With this type of arrangement, the trust grantor is responsible for paying income tax on the trust assets. Any income the trust generates or receives is taxable to the grantor, who reports it on their personal tax return.

A non grantor trust is any trust that is not a grantor trust. This kind of trust affords no control or powers to the grantor. That means they’re unable to revoke or change the terms of the trust or make changes to trust beneficiaries.

In terms of taxation, the lack of control means that a non grantor trust is treated as a separate tax entity. The trust itself is required to pay taxes on any income that’s received and file a tax return using a tax identification number.

Non Grantor Trust Advantages

Middle-age couple engaged in estate planning

Creating a non grantor trust can offer certain tax benefits to the trust grantor. First, the grantor wouldn’t have to pay tax on the trust income. This might be an advantage in a situation where the grantor prefers to assume no further financial responsibility for the trust or its assets. For example, if you’re divorced and getting remarried, you may set up a non grantor trust for a former spouse or children from that marriage to avoid paying income tax on assets held in the trust.

There can also be positive tax implications if the trust beneficiaries are in a lower tax bracket than the grantor. When trust income is distributed to beneficiaries in a lower tax bracket, it may be taxed at a lower rate than it would if the grantor were being taxed.

You may consider creating a non grantor trust if you run a business. The qualified business Income (QBI) deduction allows eligible taxpayers to deduct up to 20% of qualified business income as well as 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. This deduction is phased out business owners once they reach certain income thresholds.

So where does a non grantor trust fit in? For tax purposes, non grantor trusts are treated as separate entities. If you own a business and your income is above the allowed threshold to qualify for the QBI deduction, you could establish one or more non grantor trusts as a work-around. Essentially, by dividing ownership of business assets and its associated income, it may be possible to qualify for the 20% deduction.

Finally, non grantor trusts can be useful for high income taxpayers or individuals who own high value property. The Tax Cuts and Jobs Act (TCJA) placed a $10,000 cap on state and local tax (SALT) deductions. If your state and local tax liability is above the threshold, you could use one or more non grantor trusts to distribute assets and maximize tax benefits. Since non grantor trusts are recognized as separate entities for tax purposes, they enjoy a $10,000 SALT deduction limit all their own.

Non Grantor Trust Disadvantages

There are some potential drawbacks associated with non grantor trusts. First, as the trust grantor you lack control of what happens with trust assets. With a grantor trust, on the other hand, you’d still have certain powers you’d be able to exercise.

Next, its important to consider how any transactions between yourself as the grantor and the trust may be taxed. Generally, certain interactions, including the movement of assets or income between the two, is taxable since you and the trust are two separate entities. This difference may create tax liability on either side when conducting certain transactions.

Finally, there’s the cost and setup involved in establishing a non grantor trust. You’ll need to choose someone to act as the trustee, as grantors cannot be the trustee of a non grantor trust. This individual or entity is typically entitled to be paid a fee for overseeing and administering the trust, which is drawn from trust assets.

Incomplete Non Grantor Trusts

Older couple doing estate planning

An incomplete non grantor (ING) trust is a type of trust that’s used for asset protection. This type of trust is often used by individuals who live in states with high income tax rates or no state income tax at all. For example, if you live in a state that has higher income tax rates you could establish an incomplete non grantor trust, then fund it using appreciated assets that have a low tax basis. If the trust is established in a state that has lower income tax rates or no state income tax, this could reduce the grantor’s tax bill when selling those assets later.

Incomplete non grantor trusts can also make it possible to transfer ownership of assets to the trust without paying gift tax. This would also convey the other tax benefits associated with non grantor trusts. Whether it makes sense to establish an incomplete non grantor trust can depend on the tax rules where you live. Talking to an estate planning attorney or tax professional can help you decide if it’s a suitable option for managing assets.

Bottom Line

Non grantor trusts can be useful in a variety of situations from a tax and estate planning perspective. The most important thing to know about them is how they’re treated for tax purposes. Also, keep in mind that they don’t offer the same degree of control and decision-making as grantor trusts.

Tips for Estate Planning

  • Consider talking to a financial advisor about various tax planning strategies you may incorporate into your financial plan. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor, get started now.
  • Grantor and non grantor trust define how a trust is taxed. But there are other characteristics of trusts that are important to understand. For example, whether a trust is revocable or irrevocable matters for tax and estate planning. A revocable trust can be changed after the fact while an irrevocable trust cannot. It’s also helpful to understand different types of trusts that may be useful in estate planning. For example, a testamentary trust can be used to transfer assets in accordance with a last will and testament while a special needs trust may be established on behalf of a special needs dependent. An estate planning attorney can help with deciding which type of trust might fit your situation.

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Warranty Deed vs. Deed of Trust

A warranty deed

When purchasing a home, there are a number of very important legal documents involved. Two such documents that you may encounter are a warranty deed and a deed of trust. A financial advisor could help you navigate through important financial decisions when buying real property. Let’s break down what each document does, what the differences between them are, and when they might come up in the home-buying process.

What Is a Warranty Deed?

A warranty deed is a legal document that is used when transferring ownership of property from a grantor (seller) to a grantee (buyer). It is provided by the seller, and offers certain guarantees to the buyer of that property.

The warranty deed guarantees to the buyer (and the buyer’s lender, if applicable), that the property:

  • Is owned by the seller, free and clear
  • Does not have any outstanding debts, including mortgages
  • Does not have any outstanding liens, judgements or encumbrances

Essentially, a warranty deed affirms that the seller owns the property, has the right to sell the property and that no third parties can lay claim to the property. It is often issued as part of a title search and includes important details such as the address of the property, a description of the lot or parcel, information about the parties involved and the date of the transaction.

Getting a Warranty Deed

When it comes to warranty deeds, there are two types you could encounter: a general warranty deed and a special warranty deed.

A general warranty deed guarantees everything mentioned above and affirms that the property has a clear, transferable title. Generating one of these typically involves an extensive title search. If a lien, judgement or other claim to the property is later found or brought forward, the grantor who issued the general warranty deed can be held liable.

A special warranty deed is the more limited of the two. It also affirms that the seller owns the property and intends to sell it to the buyer; however, it only guarantees that there were no liens, judgements or claims against the property while the seller owned it.

Special warranty deeds don’t offer any guarantees for the timeframe before the current seller owned the property. This means that a claim or old lien against the property could eventually surface and impact the new buyer. The seller who signed the special warranty deed is not liable, though, unless the claim in question relates to when they owned the property.

What Is a Deed of Trust?

Volumes of bound deeds of trust

A deed of trust is a different type of real estate document that you may receive when buying a home, and can replace a mortgage loan in certain states. Essentially, this document is the buyer’s agreement to repay their mortgage lender according to the terms of their new home loan. A deed of trust is issued at closing, and involves three parties: the trustor (borrower), trustee (third-party who will hold the title; usually the title company) and beneficiary (lender).

As with a mortgage loan agreement, the deed of trust will spell out the details of the agreement including a description of the property, the original loan amount, how the loan will be repaid, what happens if the buyer defaults, any fees involved and a schedule of the loan.

When the lender issues a deed of trust, the borrower will provide the lender with a promissory note in return. This promissory note is the buyer’s binding promise to repay the loan as scheduled. When the loan is repaid, this document will be returned to the buyer and marked as paid in full; at that time, the trustee will also transfer the property’s title to the buyer.

Using a Deed of Trust

Deeds of trust are issued in place of mortgage loans in the following states:

  • Alaska
  • California
  • Colorado
  • District of Columbia
  • Georgia
  • Hawaii
  • Idaho
  • Maine
  • Massachusetts
  • Minnesota
  • Mississippi
  • Missouri
  • Nebraska
  • Nevada
  • New Hampshire
  • New Mexico
  • North Carolina
  • Oregon
  • Rhode Island
  • Tennessee
  • Texas
  • Utah
  • Virginia
  • Washington
  • West Virginia
  • Wyoming

In Alabama, Arizona, Arkansas, Illinois, Kentucky, Maryland, Michigan, Montana and South Dakota, lenders can choose to use either a deed of trust or a mortgage. In the remaining states, only a mortgage loan is allowed.

Bottom Line

Couple looks at the deed to their house

When buying a home, you are likely to encounter a warranty deed, a deed of trust… or sometimes, both. However, while these two legal documents are an important part of the real estate process, and often involve a title company, they play two very different roles. A warranty deed ensures a buyer that the property is owned by the seller and is able to be sold without any encumbrances. A deed of trust is used in certain states, and represents a buyer’s guarantee with their lender to repay the property loan as scheduled.

Tips for Warranty Deeds vs. Deeds of Trust

  • Depending on which state you purchase a home in, you may be issued a deed of trust in place of a mortgage loan agreement. Warranty deeds may be required by lenders before they will finance a home purchase.
  • If you have additional questions about the types of warranty deeds, what your deed of trust means or how it differs from a mortgage loan, consider chatting with a financial professional. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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Executor vs. Administrator: Key Differences

A female administrator of an estateWhen someone dies, everything that he owns becomes known as his “estate.” This estate is the sum total of assets, debts and property owned and owed by the decedent (a legal term for the person who died). Someone has to manage these assets and make sure they get to the right place. That someone is known as either the executor or the administrator. Consider working with a financial planner as you create or update an estate plan.

A Note On State Laws

It is important to note at the outset that laws covering estate planning, like property law, is extremely state-specific. As a result this article will only discuss the subject of executors and administrators from a very general perspective. Most states share the same general definition for these roles, and most appoint them using similar procedures. However, beyond that the details will vary widely. And some states don’t even share the same general principles.

What Is an Executor?

Executors and administrators both manage the estate and assets of someone who has died. Typically these roles share largely the same rights and responsibilities.

An executor (or executrix for females) is someone who has been named in a last will and testament to administer the decedent’s estate.

Overall, the job of an executor is to ensure that the decedent’s estate is protected and distributed to all legal heirs. Depending on the size of the estate this can be a complicated job, but most of the time it requires a few main responsibilities:

  • Gather or identify the decedent’s assets and preserve them intact;
  • Pay any debts and taxes that the decedent still owes;
  • Distribute the estate according to the terms of the will; and
  • To the extent that the estate cannot be fully distributed based on the terms of the will, identify any existing heirs and distribute the remainder of the estate.

For someone who has a simple estate or a simple will, this process can be very straightforward. However, this isn’t always the case. Often an executor will have to divide up property or find missing assets based on the terms of the will. In other cases the executor will have to sell off assets in order pay off remaining debts or taxes. This process can take a significant amount of time and effort depending on the size of the estate.

Usually the biggest challenge for an executor is ensuring that the estate is distributed according to the terms of the will. If the decedent made a complicated will or set conditions under which different heirs can inherit, this can lead to a lengthy process of determining exactly who is the legal heir for any given asset. If someone challenges the will, the executor is responsible for defending it (or seeing that it is defended).

An executor will usually receive compensation for their time. Typically this compensation is written into the will. In many places, if the will does not provide for specific compensation, state law allows for executors to claim statutorily approved rate of compensation.

What Is an Administrator?

Estate planning documents

An administrator serves the same role as an executor. They manage the assets of someone who has died and see that those assets go to the legal heirs. The biggest difference is that an administrator is appointed by the probate court in cases where someone dies without a will. (This is known as dying intestate.) Since they have died without a will, the decedent could not name an executor. So instead the court appoints an administrator to handle things.

An administrator’s job is technically identical to that of an executor: gather the estate’s assets; pay off any debts; distribute the remainder among the legal heirs.

The main difference is that, because an administrator does not have a will to work from, they must base their decisions on statute. An administrator is first and foremost responsible finding any potential heirs. This can be difficult as, in many cases, people may not have known that a relative has died or may not have even been in contact.

Then the administrator must determine who is legally entitled to which portions of the estate and distribute the property accordingly. In case anyone challenges their inheritance, the administrator is responsible for defending the issue.

Like an executor, an administrator is entitled to reasonable payment for their time. The details of those compensation schemes differ between states.

The Bottom Line

An estate executorAn executor is someone who has been named in the will to manage your estate after you die. An administrator is someone who takes charge of your estate if you die without a will. Keep in mind that estate law is state-specific. While most states share the same general practices there are few, if any, federal laws that govern estates and inheritance. It is important to consult a local attorney before making any decisions on your own assets and estate.

Tips on Estate Planning

  • Planning for after you’re gone is never pleasant, but if you have a family it’s absolutely essential. Working with a financial advisor is the wisest way to go about this. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor, get started now.
  • Estate taxes can be hefty, but you can maximize inheritance for your family by gifting portions of your estate in advance to heirs, or even setting up a trust.
  • Some inherited assets can have tax implications. Before you spend or invest your inheritance, read more inheritance taxes and exemptions.

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Joint Tenants vs. Tenants in Common

Two men agree on a tenancy in common contract

When it comes to sharing ownership of a property with others, two frequently used options are joint tenancy and tenancy in common. While there are many similarities between the two, it’s important to understand the differences and how they can affect your rights, as well as the rights of your beneficiaries. A financial advisor could help you consider which ownership structure works best for you. Let’s compare joint tenants versus tenants in common, how they differ and when you would choose either one for a shared property.

What Are Joint Tenants?

A joint tenancy is a common form of shared ownership. Joint tenants can be two or more individuals who own property together. These individuals may be married spouses, domestic partners, family members, friends, other relatives and even business partners.

Joint tenancy is established when the property’s deed is issued. This means that the joint tenants will need to purchase the property together, at the same time. 

Within a joint tenancy, each tenant owns a shared interest in the property. This means that each tenant can make decisions about the property, including improvements or whether to rent the property out. Joint tenants share in the proceeds of the property and are equally responsible for expenses related to the property.

Joint tenants own equal shares of the property; unlike some other arrangements, a joint tenancy cannot grant a larger share of ownership to one individual.  

Joint tenancy also creates what’s called right of survivorship. This means that if one owner passes away, their share of the property is automatically transferred to the remaining owner(s). If there’s only one other owner, he or she will assume full ownership.

With right of survivorship, the remaining owner(s) assume the additional share of ownership without the property needing to pass through probate.

What Are Tenants in Common?

A goup of townhouses

A tenancy in common is another ownership arrangement that is available to two or more individuals. However, there are many differences between a tenancy in common arrangement and joint tenancy. The first is that tenancy in common can be created at anytime. If you purchase a property and later want to add a tenant in common, you can do so. There can also be two or more tenants in common. 

With a tenancy in common arrangement, the ownership of the property does not have to be shared. If two tenants in common want to equally share a property, they can do so; however, if they want one owner to have a 90% share and the other to only have a 10% share, that’s also possible.

A tenants in common arrangement does not include an automatic right of survivorship, either. This means that one tenant’s share of the property does not simply transfer to the other owner(s) upon his or her death. Instead, tenants can leave their share of the property to anyone they would like.

Because this arrangement doesn’t include right of survivorship, though, it also means that the property may need to pass through probate. This will depend on who the other owners are and whether the owner who has passed away had a will in place.

How Joint Tenancy and Tenancy in Common Compare Joint Tenancy Tenancy in Common When it’s created At purchase Anytime Number of owners Two or more Two or more Degree of ownership Equal Can be unequal Right of survivorship Yes, automatic No, owners can pass property to anyone upon their death If probate necessary? No Possibly Bottom Line

Two businessmen consider jointly owning a property

When it comes to owning property with another person, it’s an important part of estate planning to understand all your options. If you want (or need) to share ownership in a property with others, two options are to be either tenants in common or joint tenants. Both of these legal designations bring benefits for property owners; however, there are some key differences regarding ownership shares, survivorship and even the purchase timeline that are very important to remember.

Tips on Estate Planning

  • Deciding to be joint tenants versus tenants in common depends on a number of key factors, including how you want that property to pass to your loved ones after you die. Be sure to consider these when planning your estate.
  • A financial advisor could help you determine which legal designation is right for you. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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Why We Need A Will And A Power Of Attorney

When you hear, ‘estate planning’ what is the first thing that comes to mind? For most of us, we may default to the process of dispersing physical assets such as homes or cars. While this indeed does apply, estate planning in general captures so much more.  It also determines how a person’s assets will be preserved, managed, and distributed after their death if they become impaired.

Planning is everything and this includes discussing what happens as we all naturally age. Who will be in charge of our affairs? What happens if I’m unable to make sound decisions on my own behalf? Where and how should I distribute my money and other assets? It is never too early to begin this process and begin answering these questions.

What is the purpose of a will and why is it important?

A will is a living document that explicitly lists all assets and debts tied to a specific person. Not only is this document a necessity to ensure every wish is respected after a person’s death – it guarantees everything is divided and dispersed as outlined. This can be limited to one person or multiple people such as a spouse, children, friends, or a charitable organization. A will is also leveraged to appoint a legal guardian to care for minors, if applicable.

When should I create a will?

Anyone can create a will at any time and it’s typically best to plan ahead and create one soon as you feel the need to or when you acquire important assets. Please note that you can update, change, or cancel the will at any time. Certain major life events may also require changes to a will such as the purchase of a home, marriage, or expanding your family with children. This is one of the best times to replace or make any additions.

How do I create a will?

Making a will isn’t difficult or expensive. It takes time and effort, but it isn’t as daunting as many may paint it out to be. Here are a couple different methods:

Write it yourself. A will is legally binding if you write and sign it. To ensure the document is legally binding, be sure to research the law in your specific state for details. It’s best to have a notary present to witness to avoid any hiccups for your executors in the future.

Use the expertise of legal counsel. You can always leverage this option to ensure you do not miss any pertinent details. A paralegal or lawyer will be able to address things you may have not considered. Often times law firms can store these documents safely as well.

Once the will is written, you should store it in a location that your loved ones and executors can easily locate. You can keep it at home with other important documents, preferably in a fireproof box, or a safe deposit box. The key here is to make sure it is accessible. If the location of the document changes due to moving or emergency – make sure the people that need to know where it is can locate it with no issues or hassle.

What is a power of attorney?

A power of attorney is a mandate given by one person (the grantor or principal) to another person (the agent) to represent him or her in an action. In other words, it is the power granted to act and make decisions on the agent’s behalf if they become incapacitated.

There are four different types which we’ll explore.

General Power of Attorney: In this scenario, the agent can perform almost every act as the principal, such as opening bank accounts and managing personal finances. A general power of attorney arrangement is no longer valid when the principal becomes incapacitated, removes the power of attorney or passes away.

Durable Power of Attorney: This specific arrangement designates another person to act on the principal’s behalf and includes a clause that allows the agent to maintain the power of attorney before, during, or after the principal becomes incapacitated.

Special or Limited Power of Attorney: In this instance, the agent has specific powers limited to a certain area or category. An example is a power of attorney that grants a person the authority to sell their home or real estate.

Springing Durable Power of Attorney: In some states, a springing power of attorney is available and becomes effective when an unfortunate event occurs, resulting in the principal becoming incapacitated.

What makes a power of attorney document valid?

The grantor must be mentally competent when they sign the power of attorney. The process of having witnesses sign the document also helps to ensure that it’s 100% authentic, no coercion is taking place and everyone involved is competent. Also, you need to notarize their signatures, further strengthening credibility.

What is the process to complete power of attorney documentation?

Obtain the required forms: Either from a local lawyer’s office or via any source that offers accurate, legal documents. You can easily find many forms or templates online. You can tweak this documentation to meet your personal needs.

Complete the forms thoroughly: If you have any questions or concerns, don’t hesitate to consult a lawyer before completing this agreement. Be sure to review this documentation with your appointed agent(s) to ensure everything is concise and clear.

Have the papers notarized: With your agent, sign the papers in the presence of a notary. Local banks and law offices typically have them available. Similarly to the wills, make copies of the agreement and file them in safe places. You should store all of your estate planning documentation n a central location.

While it’s never easy to discuss these topics as you age, it provides a different level of peace of mind.  Ensuring your loved ones are aware of your wishes beforehand creates a smoother, less stressful process.

The post Why We Need A Will And A Power Of Attorney appeared first on MintLife Blog.

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What’s a Certified Probate Real Estate Specialist?

Probate court hearing documentsUnless your loved one puts their estate into a living trust or similar legal arrangement, the fact of the matter is that their assets will likely need to pass through probate when they die. Probate is a complicated, and usually lengthy, court process where assets are sold or distributed and any outstanding debts against the estate are settled. If your loved one has left behind property that needs to pass through probate, a certified probate real estate specialist can be a valuable partner in the process. Here’s a look at what this specific type of real estate professional does and how they can help as you navigate your loved one’s estate.

Disposing of an estate’s assets in an equitable and tax efficient manner is best done with the guidance and insight of a financial advisor.

What Is a Certified Probate Real Estate Specialist?

A certified probate real estate specialist, or CPRES, is a real estate professional who has completed an educational certification program centered around the probate process. This individual specializes in helping families navigate the estate process after a relative or other benefactor passes away.

CPRES professionals are well-versed in handling real estate assets that have wound up passing through probate. They also have extensive knowledge of:

  • Wills
  • Trusts
  • Conservatorships
  • Estate settlements

They are a valuable – and often necessary – partner if you find yourself needing to sell a property that’s in probate.

What a Certified Probate Real Estate Specialist Does

Elderly man works with his real estate agent

So, what exactly is a certified probate real estate specialist’s role? A CPRES is trained to help navigate the probate court system. This includes monitoring legal deadlines and ensuring that they are not missed. He or she will also offer guidance on the complicated legal steps and documentation that are required as part of the probate process. They can also minimize the potential for disputes between heirs.

In addition to guiding you through the paperwork and other legal aspects of probate court, your CPRES can also recommend inspectors, appraisers, contractors and other professionals. This ensures that the passed-down property is accurately appraised, necessary repairs are made and that it is prepared to go on the market.

A CPRES-designated realtor will also walk you through every step of the marketing, negotiation, sale and escrow processes. They can help you market, sell and manage the proceeds from an estate-passed property as per the probate court’s rules. They also ensure that the sale of the property is as successful as possible.

Your CPRES will maintain communication among all heirs, minimizing conflict and making an already emotional process easier for all involved.

Why You’d Need a Certified Probate Real Estate Specialist

There are a few ways to avoid probate. However, all of them will need to have been established before the death of your loved one. To avoid property passing through probate, the owner can:

  • Establish a living trust, which holds and distributes the assets upon the owner’s death.
  • Own a property that is considered community property with a spouse. This allows it to pass automatically to the remaining spouse upon death.
  • Utilize a joint tenancy with right of survivorship. This allows for shared ownership between two or more people and passes the asset to the remaining owners upon death.

Without one of these arrangements, though – or if all owners of a jointly-held property pass away at the same time – probate is necessary.

If your loved one passes away, certain assets may need to be sold in order to satisfy his or her debts or distribute the estate equally among beneficiaries. When it comes to selling property – whether their primary home, rental house(s) or other real estate assets – an everyday real estate agent might not have the knowledge necessary to help you navigate the complicated probate process.

The Bottom Line

Notary seal and gavel on top of a law book

If you are the beneficiary of property assets that need to pass through probate, CPRES can help guide you along the way. These professionals are real estate agents who hold special certifications and are experts at probate court requirements. They also have the knowledge and understanding to help prep, market and sell the property in question. CPRES professionals can answer questions you have about probate and offer support, guidance and trusted advice along the way.

A CPRES isn’t the only professional who can guide you through a probate property sale. However, this prestigious designation often means that you have a well-versed and knowledgeable partner throughout the process.

Tips for Using a Certified Probate Real Estate Specialist

  • Consider working with a financial advisor if you have property assets that must pass through probate court. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor, get started now.
  • Participating in the probate sale of a residence requires a clear understanding of how much you can afford to spend. A free calculator will give you a quick estimate of what is possible given your resources.

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