Whether you have inherited property or you’re planning on naming your own heirs, estate planning is something lower on the totem poles of fun things to do. Especially when it comes to answering questions of drafting a will. Creating your last will and testament can frequently dredge up hostile emotions, especially if the question of administration may ultimately entail going through probate.
While there are alternative options to consider, many Utah residents find wills to be the fastest and most effective way of ensuring the succession of property. Unfortunately, they’re also more subject to interpretation and highly contested, And it’s not just heirs who can contest property. It can be creditors as well. But there’s a few things to know about wills and inheriting property, both generally and in Utah specifically. Here are a few things you may want to keep in mind.
1- What Happens If Someone Dies Without A Will Or A Living Trust?
Utah, much like other states, adheres to a process known as intestate law wherein any assets left behind not named within the terms of a will or trust are gradually distributed to close relatives; beginning with a surviving spouse. In fact, in most cases in Utah the spouse receives the vast majority of intestate property, assuming there is one; if not, it’s descendants of the deceased who receive the property, beginning with immediate children and eventually widening out to other non-immediate relatives. This can also be one of the chief causes for dispute in probate court, however; and a court-appointed executor of an estate does not need to have any history with either the deceased nor their heirs.
Certain assets are exempt from intestate laws, including:
- Property in a living trust
- Life insurance proceeds
- Funds in an IRA, 401(k), or other retirement account
- Securities in a transfer-on-death account
- Real estate held in a transfer-on-death or beneficiary deed
- Payable-on-death bank accounts
- Property owned with no outstanding debt in a joint tenancy
However since these are typically either co-owned or designated to a named beneficiary, they are almost universally never entered into probate disputes.
2- Do Taxes Need To Be Filed After Death In Utah?
Both federal and state taxes need to be filed by either the named personal representative of an estate (which can include an heir) for property not entered into probate; or a court-appointed executor for probate property. While taxes do not have to be paid out of pocket for either, they will have to be taken out of the estate prior to distribution to heirs and beneficiaries.
The personal representative or executor must create a separate tax identification number from the deceased for the estate in order to be filed. This can be done simply by filling out a downloadable SS-4 form located here.
3- Is There An Inheritance Tax In Utah?
Thankfully, there is no state inheritance tax in Utah. However, if the deceased had property in Iowa, Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania (the six states which still currently maintain estate tax), heirs in Utah could be taxed on assets over $25,000.
Utah residents can still be subject to federal estate tax laws only if the value of the deceased’s assets are greater than $11,400,000. Utah’s state inheritance tax exemptions do not preclude future property taxes on physical homes or capital gains taxes; the latter of which are taxes that are paid when an asset that has gone up in value is sold. Capital gains taxes are based on the difference from the value at inheritance and the value at the date of its sale. In Utah, long and short-term capital gains are subject to a personal income tax rate of 4.95 percent.
4- Does All Inherited Property Need To Be Entered Into Probate?
Property which is co-owned or designated to a named beneficiary is rarely entered into probate unless there is a suspicion of fraud or any outstanding debt is owed. If property falls below $100,000, there is an additional affidavit which can be filed known as a “small estate” affidavit which also exempts it from being entered into probate. A small estate affidavit is not filed with the court, but simply signed and notarized within a 30 day period; at which point, it’s submitted to any third parties which can claim the property (such as a bank.)
Utah law prevents physical property, such as a home, from being entered under in a small estate affidavit, nor does it permit the transference of any titles. The $100,000 threshold only applies to estates physically located in Utah; each state will have their own particular laws regarding small estates.
5- Can Creditors Claim Inherited Property?
Legally, creditors can not only claim non-probated property but are actually given chief priority over a spouse or other heirs. This is especially common in the case of homes in threat of foreclosure, but can also apply to banks and investment accounts, stocks, bonds and other non-physical assets. All remaining assets are distributed to heirs and beneficiaries only after collection by creditors.
In Utah, it’s the responsibility of the named executor (or court appointed, if property is entered into probate) to contact any ascertainable creditors in order to ensure the payment of any outstanding debts on an estate. State law requires this must be made through both personal contact as well as published notice in a newspaper over three consecutive weeks. Any legally entitled creditors to an estate have 90 days to submit a claim. Any claim made after that period can be subsequently barred.
6- Are There Exemptions From Creditor Claims In Utah?
Under Utah state law, a homestead exemption can be claimed for up to $5,000 exemption from seizure if the property is not the primary residence of a single individual, and up to $10,000 if the property is jointly owned. A physical home which is a primary residence can be claimed for up to $24,000 for single individuals and up to $48,000 for joint tenancy.
Joint tenant property is subject only to claims for debts that are the shared responsibility of one or more tenants. In Utah, a tenant can force the sale of property upon another tenant’s death to meet creditor demands; and unfortunately, joint tenancy frequently also means a shared responsibility.
7- If I’ve Inherited A Home Under Debt Can I Force A Sale?
In order to meet creditor demands, yes. Short sales are the easiest way to avoid foreclosure, but frequently the most grueling to enact in a short period. Not only are there broker fees to consider, but buyers frequently tend to shy away from purchasing homes which were part of a deceased owner’s estate.
Gary Buys Houses offers a program we call “Sell Now Move Later.” It’s intended to help heirs of property which is in threat of foreclosure—or even those who simply don’t want to be burdened with maintenance or property taxes. We’ll purchase your house as is in as little as three business days; and we can even try to assist you by handling any remaining questions you have regarding ownership.
We know there’s a lot to consider when leaving property behind in a will. There’s even more to consider when inheriting property. And the more complicated an estate is, the more complicated a will can be. Just remember that in the end, the simplest option can be the most effective—so long as you know what to watch out for.