From: Louis Newstrom (louisnews@comcast.net)
Date: Mon May 27 2002 - 12:37:32 MDT
From: "Mike Lorrey" <mlorrey@datamann.com>
> but probate court wants to make sure all creditors are paid
> before the family gets anything
Yes. The laws definitely say that all debts of the parents will be paid
before family gets anything.
> PLUS the family pays the inheritance
> taxes, INCLUDING the taxes on monies paid to creditors
I would be surprised if the family paid inheritance tax on money that went
to creditors. (But I have never been in that situation nor have I checked
the laws.) I do know that a common scenario is that the kids take the house
(and get stuck with an inheritance tax) and then have to sell the house to
cover the tax they just got. I think they end up with more money in their
pockets, but they lost what they really wanted, which was the house!
> A proper way to protect your assets (and your parents assets) is to use
> living trusts instead of wills. A living trust says "I get to use this
> thing until I die, at which time it can then be used by X" but remains
> the property of the trust at all times and the inheritor doesn't pay any
> taxes, nor can creditors get their mits on it (unless there are
> pre-existing liens that are paid through the trust under its own trustee
> arrangements). Living trusts are also immune to probate court oversight
> (and the long delays that entails) and are a great way to easily pass
> property along as you wish, unencumbered.
One warning on trusts (and again I am NOT a lawywer) is that trusts get
around inheritance laws by giving your property to a legal entity which is
not you. If properly done, you enjoy the benefits of something without the
penalties for actually owning it. Unfortunately if improperly done, you can
end up with trustees doing things with your property that you don't approve
of.
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