Tag: probate court

Estate Planning

Avoiding Probate Litigation

SchulzeLawGroup

Disputes over guardianships, conservatorships, wills, trusts, and family real estate may be part of probate litigation. The most successful approach to mitigating or avoiding probate litigation risk is carefully planning for the future. Comprehensive estate plans that are routinely updated, careful consideration and documentation of gifts, and protective measures in the event of incapacity contribute to a challenge-free transfer of your estate assets to heirs.

Avoiding Probate with Trusts

A great way to avoid probate litigation is with a revocable living trust that permits you to title assets into the trust and manage it until your death. Years of managing your assets within this trust type prove that you handle your finances and property exactly as you intended if a contest is brought before a probate judge. Your competent management greatly reduces the risk of litigation as it demonstrates your mental capacity and financial management capability.

Common Causes for Contesting a Will in Probate

Gift-giving and real estate transfers to your children during your lifetime may open the doors for litigation after you are gone, particularly if these transfers have complex provisions and varying percentages. Consequences for unequal transfer of property or gifts often lead to children feeling the circumstances are unfair. Your adult children may not interpret your underlying future intent. For example, dividing ownership of the family cabin, giving one child eighty percent and the other twenty.

The same holds for personal gifts like jewelry, baseball cards, or art collections. A parent may promise inheritance of a gift, but you may be inviting future probate litigation without detailing it in a document with your signature. Gift promises and real estate transfers often lead to disputes between siblings, leading to probate litigation.

Ensuring Your Wishes are Followed When You’ve Been Incapacitated

Incapacity can be a challenging topic for a family to work through. Anyone at any age can become incapacitated by a sudden illness or accident. The thought of relinquishing financial and health care decisions to adult children or other family members can be unsettling. But implementing financial and medical powers of attorney can help avoid future litigation between family members. Nominate a guardian and financial and medical conservators while you have sound decision-making capacity and autonomy. They will be designated in your will and durable powers of attorney documents.

You can still make your own healthcare decisions even with a health care proxy or medical power of attorney. These individuals can only make decisions on your behalf once a doctor deems you physically or mentally incapacitated. In contrast, a durable financial power of attorney will retain decision-making powers over finances upon signing the document. An estate planning attorney helps you identify the criteria to consider for your specific needs when making decisions for this crucial role. Select both of these representatives well in advance of the unforeseen events that will require their help.

Planning Ahead

Establish your will and trusts early on as they are vehicles to control and communicate your personal and real property distribution to heirs. Your will protects your family from intestate statutes or laws that govern dying without a will. Your will nominates a personal representative to oversee your estate, the payment of outstanding debts, final taxes, guardianship, and the dispersal of remaining assets.

Know that most states will not consider stepchildren as part of an inheritable estate without a will specifically including them. Without a will naming a representative, most families typically fight over who is best suited to the job. This situation can lead to expensive and time-consuming litigation.

To avoid probate litigation, your will and the naming of financial and medical durable power of attorney representatives are crucial estate planning elements. To guard against litigation more fully, a revocable trust avoids court oversight altogether except in the case of a challenge. However, if you have been competently overseeing the revocable trust, this presents a formidable challenge to contest.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

Getting to Know Creditor Rights and Probate

SchulzeLawGroup

By avoiding probate through legal methods, you can save taxes, keep your estate out of public view, and avoid needing court approval every step of the way. It can save you time, frustration, and in many cases, significant attorney and court fees. Your personal representative sometimes referred to as an executor, must formally notify all your creditors of your death. This action is one of the first steps in the probate process. Often this is as simple as placing a notice of death in a local newspaper(s) to which creditors respond and file a timely claim to the probate court for estate payment of the said claim.

Outstanding debts typically include credit card payments, mortgage, car payments, insurance, real estate taxes, utility bills, medical and funeral expenses, and other legal debts incurred but not yet paid. The probate timeline for creditors to file a claim varies by state. On average, between three to six months is a creditor’s window of opportunity to submit formal claims to your estate for payment. If there is no contest over the debt, the personal representative will pay the outstanding bill with estate funds; the creditor will receive payment in full, which completes the claim.

Personal representatives, beware. Do not distribute assets to beneficiaries before the balance of the estate’s taxes and all outstanding debts are completely paid or dismissed by the probate court. It is the responsibility of the personal representative to cover all estate expenses, and you may become personally liable for deficiencies in estate debt payments unless beneficiaries return their portions of inheritance to cover those outstanding debts. If you feel you must make a partial distribution to heirs, withhold enough monies to cover all estimated expenses.

If the decedent’s property does not go through the probate process, creditors’ claims remain pursuable for a longer time. Partly this is because there is no legal requirement to notify creditors of a person’s death. By the time a creditor may learn of the death, the debt might be so small they are unwilling to pursue its collection. A creditor may find a tax write-off of bad debt more advantageous than chasing down repayment that is not cost-beneficial.

In other cases, an estate may not have liquid assets yet hold real property with enough value to cover the outstanding debt claim if sold. Valuable inheritable property can be lost to a forced sale to cover creditor claims in probate court. A creditor forcing this type of sale drags out probate proceedings, incurring additional costs. Secured creditors receive priority over unsecured creditors. Banks are the primary secured creditor with which a personal representative may have to contend.

Suppose a person dies with substantial debt and there are limited assets to cover these debts. In that case, the estate is deemed insolvent, and there is a generally accepted prioritization of debt payment by all states. A personal representative should always pay debts in order of a state’s recognized priority list. Otherwise, debts that may be dismissible, pro-rated, or forgiven may receive payment, while secured debts never “go away.” It is essential to understand the priority order for estate debts. Note that these are generalities, and some state laws may prioritize these categories differently.

  1. Administrative costs – Common costs include court fees, filing fees, notice costs, attorney’s fees, and the administrator’s commission.
  2. Family exemptions – Many states will provide for payments helping family members handle their living expenses during the estate’s probate. This family exemption usually gets high priority to lessen financial stress as a family mourns the loss of their loved one.
  3. Funeral and burial costs – These expenses address funeral and burial costs by state law. Costs of cremation, interment, urns, markers, and associated funerary service costs are permissible as part of funeral and burial costs.
  4. Government debts – Income taxes, property taxes, and estate taxes take priority over other debt obligations.
  5. Final medical bills – The decedent’s final sickness or injury receive priority over other unsecured debts. Some hospitals will reduce final medical bills if the newly negotiated amount is paid promptly and in full.
  6. All other claims –  Usually, states do not prioritize these other more general unsecured debts. Some cases permit debt payment based on the filing date of claims, and other times debts may be pro-rated.

Assets such as retirement accounts and insurance proceeds with a designated beneficiary receive different treatment and provide more protection from creditors. The same holds for an irrevocable trust which upon death also provides protection from creditors. A beneficiary designation and specific trust entity can help to shield an estate with a heavy debt burden.

When someone dies, their estate assets must be secured and eventually distributed according to the existing Will or state intestate laws. Another vital function of the estate is for the personal representative to ensure the decedent’s genuine debt obligations receive payment. When an estate has sufficient assets to pay all outstanding debts, payment can occur in any order. If the estate leans to insolvency, the personal representative should withhold asset distribution to heirs until the probate court approves the debt fulfillment priorities. We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.