When a loved one passes away and leaves behind an estate, there are a number of steps to undertake to ensure that the testator’s will is carried out properly. A will is a legal document detailing the testator’s intentions regarding the disposal of his estate, which refers to all his possessions, including his properties, businesses, investments, financial accounts, and other material possessions. When a will is proved to be valid and the executor of the will takes stock of all the testator’s assets, pays the liabilities, and distributes the estate, this is called estate settlement. Whether you are a beneficiary, executor of will, or simply want to know more about estate settlement and the costs involved, wills and estate lawyers in Melbourne are on hand to provide guidance. When it comes to estate settlement costs, there are a few things you need to know, such as the different types of taxes and fees that are involved in the process.
What are the costs involved in order to settle an estate?
Estate settlement costs can be divided into different categories to avoid confusion. If you are an executor of will, your estate lawyer in Melbourne may advise you on how to move forward with managing the costs involved in settling an estate. Having an estate lawyer on hand is recommended because he or she is familiar with the estate laws and family laws that are applicable and can protect the will you are set to carry out. Estate settlement costs are often broadly categorised into three general classifications: cost of dying, administrative costs, and taxes.
Estate Settlement Costs: Final Expenses
If you are a testator, you may already have insurance to cover medical and funeral expenses. These fees are often placed in the category of final expenses, which are paid before beneficiaries can inherit any assets from your estate. The final expenses may also be covered by your social security and other coverage from the government or insurance companies. If not, your estate will have to cover these final expenses. These fees fall under cost of dying expenses.
If you are an executor of will who has sought legal counsel from an estate lawyer in Melbourne, you may already know about the administration costs that are involved with carrying out the will and settling an estate. Administrative costs refer to the administration costs that according to Legal Zoom are about 2% to 7% of the estate total value, depending on the law where you are. As an executor of will, you might need to enlist the help of appraisers, probate attorneys, and the like, especially when someone contests or challenges the will.
One’s death does not stop the taxes from taking effect. Which is why it’s important for both executors of will and beneficiaries to be aware of the taxes involved in settling an estate. Seeking legal counsel from an estate lawyer in Melbourne will aid in the process of ensuring that any required taxes are paid before the estate is settled. Here are the different types of taxes that may need to be completed in order to settle an estate, depending on where you live.
- Federal Estate Tax – These taxes refer to the fees that must be collected on the transfer of the testator’s assets to the estate’s beneficiaries. According to The Balance, these taxes are calculated by adding the fair market value of the assets at the time of the testator’s death. However, the executor of will can opt to have the appraisal on a later date. Allowable estate ta deductions and other exemptions are then applied to arrive at a final amount. Such federal estate taxes are dependent on your location. In Australia, there are no inheritance or estate taxes, allowing beneficiaries to receive their loved one’s entire estate.
- State Inheritance Taxes – These taxes are computed based on the assets that a beneficiary receives. In Australia, there are no state inheritance taxes.
- Capital Gains Tax – In Australia, when a loved one dies, his or her estate is immediately passed on to the beneficiaries through a legal personal representative. This means that the assets have been passed on to the individual or beneficiary. According to the Australian Taxation Office, there are no taxes involved in this process. However, if the beneficiary decides to sell or dispose of the asset, he or she will be subjected to capital gains tax. The date of the testator’s death will play a role in computing for capital gains tax.
To find out more about estate settlement costs, seek the advice of an estate lawyer in Melbourne today. Hentys Lawyers offers services of wills and estate lawyers in Melbourne who specialise in estate taxes and disputes and how to contest or defend a will. Whether you are a beneficiary, executor, or just interested in knowing more about estates, get in touch with Hentys Lawyers today.