A net estate is the total value of a decedent's estate after all of the administrative costs have been deducted. The net estate is the portion of the estate that is regarded as taxable and it is also the portion that is distributed to people designated in the will. Determining the value of the net estate takes place during probate, a process that may be supervised by a probate lawyer. A skilled accountant can also be a valuable person to have on hand while probating an estate and making estate plans in advance of death.
The total value of someone's estate at the time of death is known as the gross estate. When the estate enters probate, one of the first tasks that takes place is an accounting of everything the deceased person owned for the purpose of finding the value of the gross estate. This includes cash assets, real estate, investments, and any other assets owned by the decedent. It is important to note that valuing the gross estate does not determine who gets what. This process is conducted solely to provide a complete account of everything the decedent owned for the purposes of processing the estate accurately and fairly.
Once the gross estate has been calculated, expenses can be deducted. These include funeral expenses and the costs of settling any debts. In addition, there are administrative expenses associated with probate including fees for handling documents and a fee paid to the executor of the estate. The remainder left over once these expenses have been accounted for is the net estate.
The executor is responsible for distributing the net estate between the beneficiaries in accordance with the wishes expressed by the deceased. When a will is very precise, this may not be a challenging task. In other cases, wills may be unclear or outdated, and beneficiaries themselves may contest about their inheritances. This can cause probate to drag on as the terms of the bequests are litigated.
Laws about inheritance taxes vary. Part of estate planning should include an exploration into these laws to determine the tax implications of bequests in a will. Some people may opt to distribute assets before they die in order to reduce the size of the net estate so that beneficiaries will not be taxed. Estate planning can also include the establishment of a trust to hold assets on behalf of beneficiaries, as parents may do for children who have not yet reached the age of majority.