Tag: Probate

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

Will Writing for Blended Families

SchulzeLawGroup

Often, stepchildren in American families receive the same treatment as full-blooded children, even when it comes to inheritance. This is particularly true where stepchildren are part of a blended family from an early age. Biological siblings may have different feelings about a stepchild inheriting what they perceive as theirs as a natural heir. A surviving spouse may have the same feelings about their children’s inheritance.

Transferring an Inheritance

Estate planning for blended families is key to a smooth inheritance process, especially since probate rules and intestate succession law do not treat step and biological children the same when it comes to inheriting. Open communication about your estate plan is also helpful in managing heirs’ expectations.

Trying to be equitable among your heirs can be tricky, and relying on your spouse and children to work things out after you are gone is not a good plan. To create a solid plan, carve out some quiet time and identify your most important estate planning goals, including distributions of all assets. 

These assets include your house, car, jewelry, other personal items, investments, retirement plans, brokerage accounts, and insurance. If you opt to gift items before your death, be certain you no longer include the asset or property in your estate plan. Even items of little financial value may be an expected inheritance from a child. The goal is to reduce tensions among family members. 

Creating a Trust

Share your ideas with your spouse and agree on a basic approach, including scenarios for who might pass away first. Leaving property outright to a surviving spouse may not be the best approach as it does not ensure the children, step or otherwise, ultimately benefit. Many blended family systems use a trust to provide for a spouse while leaving their property to their children.

Will Contests

Stepchildren can contest a will to be treated as a full biological child if they are named in a prior will. A will that was written before a remarriage creates an opportunity to contest. Note that your stepchildren have very little chance of inheritance without a will. Dying without a will or intestate prevents your stepchildren from inheriting in all but a very few states. In states where they are eligible, stepchildren will be considered last in line to inherit because of the laws of intestate succession. 

A stepchild named in a previous will can challenge on the grounds of undue influence, lack of capacity, mistake, fraud, or coercion. If the will being contested is thrown out of probate, estate inheritance reverts to the next most recent will. A stepchild must be named in at least one prior will to have “standing” to challenge the will. If all wills are invalidated, the state will treat stepchildren as intestate heirs.

Separate Wills

Even if a biological parent, in concert with a stepparent, makes their wills simultaneously and identically to leave the estate to one another, a surviving spouse can change their will upon the death of the other. It’s possible they may then exclude the stepchildren. But, if the original will left equal shares to biological and stepchildren, a stepchild could contest to have the most recent will invalidated.

Reciprocal or Mutual Wills

Most states do not recognize reciprocal or mutual wills as a binding contract. A mutual will can only be enforced if it specifically constitutes a binding contract that can’t be changed. It’s far more reliable to create a trust to care for a surviving spouse and your children’s inheritance than depend on mutual wills and goodwill after you’re gone.

While contesting a will is permissible under certain circumstances, there is no guarantee it will be successful. To ensure your legacy wishes are met, consult with a qualified estate planning attorney who understands the intricacies and nuances of estate planning for blended families.

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

Probate’s Timeline

SchulzeLawGroup

A will must go through probate before it is acknowledged, a personal representative (executor) is named, and assets are distributed according to the will. It also requires paying the decedent’s outstanding debts and federal and state taxes. Each state has different laws determining if probate is necessary or can be expedited, whether the fiduciary requires bonding, and what reports must be prepared. The probate experience is unique, as no two wills are the same.

In general, the timeline of the probate procedure moves quickly if the estate has minimal assets and little debt. Larger estates can expect a process lasting anywhere from nine months to a few years, especially with problematic family dynamics. An estate planning attorney or probate lawyer can help guide efforts in these more complex or contentious circumstances. During a time of grief, it is reassuring to have a general probate timeline to help manage expectations and deadlines as you move through the process.

Prepare and File the Probate Petition (1-4 months)

Filing a probate petition requires a valid will and the decedent’s death certificate, usually provided by the funeral home. The personal representative or executor sends an official notice of probate to beneficiaries or interested parties, with each state having specific requirements regarding the notification process. To speed the process, when there is agreement among beneficiaries, each party signs the “waiver of process consent to probate.” This consent form advises the court there are no issues with the will, and beneficiaries forfeit the right to challenge the will or its executor.

Usually, an executor sends a notice of probate within the first two months of the decedent’s passing. Some states require a notice of death published by the executor in the newspaper. The executor provides the funeral home with the decedent’s Social Security number, and they create a legal death certificate. An executor may prefer to purchase several death certificates for larger estates. It is a responsibility to report the person’s death to the Social Security Administration. If the decedent received medical benefits, a notice of death to the Department of Health and Human Services (HHS) is a requirement.

Provide Notice to Creditors (3-6 months)

Like all beneficiaries, all creditors must be aware of the decedent’s will. The estate’s personal representative notifies appropriate claim holders via a formal notice to creditors and other firms, companies, or people to whom the decedent owed money. It is important to follow court rules for notifying creditors. Discovery regarding the deceased’s outstanding debts is most easily achieved by gathering the remaining bills or requesting a copy of the decedent’s credit report.

Payment of Debts and Fees (6-12 months)

The decedent’s creditors receive notification of the individual’s death with a formal notice of death and notice to creditors. The executor must pay all professional and personal debts from the estate with estate funds. The estate is also responsible for payment of the decedent’s state and federal income taxes before the probate process can conclude.

Additionally, the process of probate itself costs the estate money. All fees and administration costs relating to probate are to be paid by the estate via the personal representative’s actions. The fee structure can increase based on the length of time a will is in probate, so the executor benefits by moving quickly and carefully.

Asset Inventory (6-12 months)

An inventory of the estate’s assets is a crucial part of the will since it becomes part of the official estate record. The task can be time-consuming, particularly if the estate’s records are in disarray. Most asset inventory will include:

  • Bank accounts, including savings and checking accounts
  • Property and real estate
  • Stocks and bonds
  • Retirement accounts
  • Life insurance and annuities
  • Luxury items of significant value, like jewelry, watches, art, and other collectibles
  • Intellectual property, including patents, trademarks, copyrights, software databases, and design rights
  • Online line business ventures that produce income or have stand-alone value

Jointly owned real estate, property, vehicles, and financial accounts transfer to the surviving owner. Probate is also not required for IRAs with a beneficiary or other accounts with a pay-on-death designation.

Asset Distribution (9-18 months)

Before asset distribution, the estate’s executor should make every effort to pay all outstanding debts. When all creditor bills are paid, and the remaining assets are accounted for, some state probate law dictates the distribution of assets occur only after the probate hearing. Concluding the probate hearing first prevents the opportunity for an ungrateful or disgruntled beneficiary to threaten the will’s validity.

The Estate Closing (9-24 months)

Probate can conclude when all creditors are paid, taxes are filed, and assets are sold or distributed. After finalizing the executor’s duties, the probate court judge then issues the final order of discharge of the personal representative. This court action officially closes the estate.

All wills go through probate proceedings; however, it is not the only available option. Larger estate owners may prefer to protect the futures of their loved ones using trusts. There are advantages to avoiding probate as it can be lengthy, complex, expensive, and is always a matter of public record.

Your estate attorney can customize an estate plan for your family situation. Our estate planning firm can advise trusts and other legal mechanisms to lessen the probate process or let you know if your estate is a candidate for an expedited process. There is a general timeline for the probate process, yet, all wills and state laws are different.

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

Estate Planning to Reduce Probate

SchulzeLawGroup

The probate process occurs after someone passes away. Probate can be lengthy, complex, and expensive, but good estate planning can mitigate unwanted risks by anticipating and preventing problems before they arise. Sound estate planning can make the probate process run efficiently and smoothly, protecting your estate’s value and legacy, and preserving your family’s well-being.

Probate includes:

  • Validating a deceased person’s will
  • Identifying and inventorying the property of the decedent
  • Getting property appraisals
  • Paying valid outstanding debts and taxes
  • Distributing the remaining assets and property according to the will
  • Applying state intestacy laws if there is no will

Avoiding Probate

An estate planning attorney can structure your estate to minimize or avoid probate entirely. Circumventing probate reduces legal fees for your surviving heirs, protects privacy as probate is part of the public record, and avoids estate tax which can significantly reduce inheritable assets.

Popular Alternatives to Probate

A revocable living trust transfers assets to the trust but allows access to them during your lifetime. This probate-avoidance technique can protect any property you own, including:

  • Bank accounts
  • Real estate
  • Jewelry
  • Art collections and heirlooms
  • Vehicles

A revocable living trust

This trust functions like a will by leaving your property to heirs, but you can change the terms of your trust and the beneficiaries or revoke it while you are still alive. After your death, the property in the trust is in the control of your named successor trustee. They distribute the property to inheritors according to the trust’s instructions without involving probate court.

Life insurance and annuity policies

Death benefits are paid directly to a designated beneficiary upon the death of the insured or annuitant and pass outside of probate. And in some states, for example, Texas, death benefits are exempt from creditor claims for either the insured or beneficiary.

Payable-on-Death (POD) accounts or Transfer-on-Death (TOD)

A simple, no-cost strategy to keep money, even large sums, out of probate by designating a beneficiary via the financial institution’s POD paperwork process for all types of bank accounts. A TOD transfer applies to stocks, bonds, and brokerage accounts in the same way. These accounts are not accessible to the beneficiary while you are alive. You can designate beneficiaries on various accounts types, such as:

As the testamentary deposit account owner, you can withdraw money, close the account, or name a different beneficiary at any time. There may be a short waiting period after the designator’s death before the bank or credit union releases funds, but probate is not a requirement.

Depending on where you live, a POD account can also be a:

  • Totten Trust
  • Tentative trust
  • Informal trust
  • Revocable bank account trust
  • ITF, short for “in trust for”

In most cases, you cannot name an alternate beneficiary, so staying current with the paperwork designating your choice is important. No matter what information is in your will, it can’t override a properly established beneficiary designation.

Joint tenants or joint tenants by the entirety designate real estate

This property designation type has two owners. When one owner dies, the surviving owner automatically owns the property. This ownership is commonly referred to as the right of survivorship and also applies to community property in community property states.

Streamlining the Probate Process

Many states have simplified probate procedures for smaller estates, meaning they are under a certain dollar valuation. Depending on your state’s rules, even if your estate exceeds the definition of a small estate, there may be an avenue to exclude large chunks of assets to lower its size and value.

Many states don’t consider the value of certain properties when evaluating an estate. These property types may include real estate, real estate located in another state, and even motor vehicles. Additionally, many states won’t count the value of a property that doesn’t pass through probate. In essence, probate avoidance can pay double dividends after your death.

When trying to minimize an estate’s value to streamline probate, some states permit you to subtract any amounts owed on a property you don’t fully own. This can make a huge difference. Knowing your state’s definition of a small estate is crucial when creating probate-avoidance strategies. Staying under a certain threshold can simplify probate.

Probate Takeaway

A sound estate plan can circumvent many issues that arise from probate, which may cause a lengthy process and reduce your estate’s value and legacy. Avoid the additional costs of probate, both monetarily and to your family’s well-being.

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

Probate with No Will

SchulzeLawGroup

When a loved one dies without making a will, or intestate, a probate court will oversee the distribution of the estate according to your state’s intestacy laws. Also known as intestate succession, it has similarities to the probate process when a will is present. Still, the terms are not interchangeable—any adult who dies intestate triggers a somewhat different process than a will going through probate.

Do You Have a Will?

Many Americans will face the challenges of their loved one dying without a will. According to Think Advisor, a recent survey finds that 59 percent of men and 72 percent of women do not have a will or estate plan. In another survey, CNBC finds a mere 33 percent of Americans have properly established estate plans. Many individuals feel they do not own enough to necessitate writing a will or negatively perceive estate planning as too complex and expensive. They leave their grieving loved ones to accept the court’s decisions regarding their loved one’s inheritable assets and possessions.

Resolving the Estate

The probate court judge’s primary duty is to oversee the lawful resolution of the decedent’s financial affairs. They will follow state law to select a personal representative as the estate administrator. There is technically no executor as no will was left to execute, yet the estate still must be legally resolved. A loved one can begin the intestacy process by going to the decedent’s county probate court, filing a death certificate, and petitioning to begin probate. They will typically nominate themselves as the administrator, but the probate court judge has the authority to name the estate administrator.

Assets Falling Outside of Probate and the Role of Administrator

Like dying with a will, dying intestate does not affect jointly held accounts and those assets with a designated beneficiary or payable-upon-death status. These may include money market, savings and checking accounts, IRAs, retirement accounts, certificates of deposit (CD), life insurance, and annuity policies. The estate administrator, as appointed by the probate court judge, will perform the functions as required by state law, including:

  • Identify and give notice to estate beneficiaries and other interested parties
  • Give notice to creditors
  • Give notice to all government agencies from which the decedent received benefits
  • Pay debts and fees, including state and federal taxes
  • Inventory assets
  • Distribute assets
  • Close the estate

Under the law, family members may inherit the remaining assets after payment of the estate’s final debts through the estate administration process. The handlers of the administration process may be one person, two or more individuals, a bank, or a law firm. In cases of estates under a certain dollar amount, the administrator may petition the probate court for a simplified version of the probate proceeding.

Standard Probate Proceedings

Though some of the filings and processes are different than probate with a will, the probate court is still actively involved if your loved one dies intestate. The probate court processes may:

Resolve or prevent conflicts – A probate court judge will decide how to answer any legal questions that may arise related to state law. When someone dies without a will, family members often claim certain assets or possessions of the decedent, citing a verbal promise. The estate administrator can avoid becoming the lightning rod of controversy for decision-making since the probate judge makes the final decision. Although this is no guarantee heirs won’t fight things out in court, in most cases, intestate succession laws prevent these disputes.

Legally Transfer Title – Real property like a house, car, truck, or boat, without joint tenancy with right of survivorship or held in trust, requires the probate court to transfer the name on the title. In cases of real estate owned by a couple or shared personal property in a community property state, titles may transfer automatically to the surviving spouse.

Cut off claims by creditors – Once the probate court process starts, creditors have a certain amount of time to bring a claim against the estate. Estate administration can reduce this timeframe in some states to as little as three months so that a creditor can’t approach a family member looking for money months or even a year into the future.

Take money from accounts – If the decedent’s financial accounts are not jointly held or do not have named beneficiaries, or payable-on-death status, a family can’t access the funds in the accounts without the probate process and approval.

Probate Laws Vary by State

In cases of dying intestate, the probate process is similar among all states, but state laws still vary. If you are administering an estate without a will, an estate planning attorney or probate lawyer can help you understand the differences in the probate process. Getting professional legal advice can be well worth the money spent to distribute the decedent’s assets according to state law and properly close the estate.

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

How to Understand Probate

SchulzeLawGroup

You can minimize or avoid probate entirely by working with an estate planning attorney. Probate proceedings are part of the public record and can be very time-consuming and expensive. However, in nearly every case, some probate is necessary, so it is important to understand how to navigate the process.

Probate proceedings seek to validate the decedent’s last will and retitle the estate’s assets into the name of heirs according to the deceased’s wishes. These court-supervised proceedings ensure estate debts are paid and oversee the distribution of assets to heirs. 

After losing a loved one, the family will generally come together and hopefully encounter a properly written will and other crucial estate planning documents. Without a well-organized plan, the probate process can take much longer. Family members will be tasked with gathering information necessary for court.

Probate Court Proceedings

The petitioner, usually the estate executor or personal representative, will begin the process by filing a death certificate and a last will to the probate court. It is also useful to produce a list of know creditors and names and contact data of the decedent’s heirs. Smaller estate probate processes and those estates not contested by heirs can usually work through probate fairly quickly and efficiently.

Laws regarding probate are state-specific, and most states set valuation thresholds. If, for instance, an estate value is less than $75,000 and no one contests the will, less formal probate hearings may move more quickly. Since the advent of COVID-19, these court proceedings may even transact over video calls.

For larger value estates, there is a substantial amount of necessary paperwork to validate the will, determine asset distribution, settle disputes, pay off remaining debts, and ultimately close the estate by paying the decedent’s final taxes. A checklist of documents to gather may include:

  • Death certificates
  • Final will
  • Revocable trust documents
  • Heir and beneficiary contact data
  • Beneficiary designations
  • Pre or post-nuptial agreements
  • Previous three years of federal and state income and gift tax returns
  • Life insurance policies
  • Real estate deeds
  • Vehicle titles
  • Statements of financial accounts
  • Contracts and business agreement documents
  • Appraisals for high-value art, collectibles, or jewelry
  • Other known assets
  • Known debts
  • Ongoing bills
  • Medical and funeral expenses

Probate Proceedings Without a Will

The decedent’s residence states intestacy laws will apply if your loved one dies without a last will (intestate succession). All personal property without a beneficiary designation will be subject to the probate process at the court’s direction.

But some assets will avoid the probate process under state property title, state contract, or state trust law. These assets may include:

  • Beneficiary designate life insurance policies
  • Beneficiary designate retirement funds
  • Beneficiary designate annuities
  • Pay-on-death or transfer-on-death accounts
  • Joint tenancy property with rights of survivorship
  • Tenancy by the entirety
  • All trust property

Cost of Probate

Complex probate processes can be costly and take years to finalize, which is why many individuals retain an estate planning attorney to minimize probate proceedings. Lengthy proceedings can be frustrating for heirs who are rightful beneficiaries but must comply with the probate process. The average cost of probate varies by state; however, five to ten percent of an estate’s value in administrative costs and legal fees is typical. Some estates may lose as much as twenty percent of their value.

Other fees may include executor compensation, court fees for filings and paperwork, and a probate bond. After the probate proceedings are complete, a probate bond may be refunded. The most common reason for high probate costs occurs when beneficiaries contest the will, as ongoing litigation can be expensive. Issues relating to preparing and filing the decedent’s last federal estate tax return and any ensuing audit may also increase the cost of the probate process.

Most individuals will create an estate plan with their lawyer that allows assets to pass outside the probate process, typically through creating a revocable living trust. Depending on your situation, your estate planning attorney may recommend other types of trusts as well as ensure that named beneficiaries on accounts that pass outside of probate are up to date. Regularly reviewing your estate plan with your attorney can help minimize probate court interactions and streamline your heir’s inheritance process. 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

An Overview of Probate

SchulzeLawGroup

ABA explains that probate is a legal process that gives legal recognition to a will, and appoints the executor, also known as the personal representative, to administer the estate and distribute property. Therefore, it is good to contact a probate lawyer to determine if the estate is small enough to bypass formal probate, whether the fiduciary must be bonded (this requirement is often waived in the will), and what reports are necessary to prepare.

The Uniform Probate Code

In more recent years, states have tried to simplify their probate procedures. The Uniform Probate Code (UPC) consists of laws written by a group of national experts to help standardize and streamline probate, and most states have adopted these standards. Across state lines, the probate process is finally beginning to work more effectively.

Probate Attorneys Help Navigate or Avoid Probate

However, this does not mean you shouldn’t meet with a probate attorney. Individual states still have different monetary thresholds for what constitutes a lower value estate that can bypass part or all of the probate process. Administering complex estates with an attorney’s guidance will be beneficial even if most estate assets already take advantage of estate planning tools designed to bypass probate. The attorney can support the executor or personal representative when providing the local courts with basic information like death certificates, form submissions, and communication with beneficiaries while administering the estate. The goal is to keep the probate process as simple as possible.

The essence of probate involves the following:

  • Determining and proving the decedent’s will
  • Submitting an estate inventory and appraisal of the decedent’s property
  • Ensuring the estate’s taxes and debts are paid in full
  • Making sure every estate asset is distributed in accordance with the decedent’s will or the state’s intestacy laws.

Probate Attorneys Help Executors Through Estate Administration

The estate’s personal representative is responsible for initiating court procedures and distributing the assets to named beneficiaries. If the personal representative fails to initiate probate proceedings, any party interested in the estate may initiate probate. Typically, these parties include those who will gain assets from the will, like a beneficiary or a creditor. In the absence of a named personal representative or if they are unwilling or unavailable to administer the estate, the court will appoint one to oversee the probate process. You may hire a probate attorney instead.

The time frames to begin the probate process are state-dependent. They begin at the decedent’s date of death and range from three to twenty or more years. Some states have no time limits for filing a will for probate, like California.

Removing Conflict and Debt Negotiation

Once the gathering and filing of the necessary paperwork for the probate process are complete, you may find a disgruntled heir or someone bypassed from the will altogether make a legal challenge to the probate court, perhaps contesting the validity of the will. These legal challenges slow administering the estate, as can handling an estate with excessive debt where property needs to be sold to make good on debt claims. A probate attorney can mediate conflicts that arise by removing emotions from the decisions and negotiating debts.

If the probate process is going to be lengthy, immediate family members can ask the court to release short-term support funds in most states. The reputation of probate is at times well deserved for being time-consuming and expensive.

The probate process can be simple only when heirs agree with the will and the dissemination of property and assets. In that case, the executor provides the local courthouse with the decedent’s last will, a certified copy of the death certificate, a list of names and addresses of heirs, and a list of known creditors.

Maintaining Privacy

If there is disagreement among heirs, it is worth sorting out issues before beginning the probate process to avoid a legal challenge to the will. Once filed, probate proceedings are part of the public record, and most people prefer privacy regarding the death of a loved one and inheritance. However, excessive delay in the probate process will likely create more complex and expensive situations to resolve. If you need to work things out with heirs before beginning probate, it is best to resolve issues, if possible, sooner than later.

Avoiding Probate with Estate Planning Tools

While some probate processes can be extensive, taking multiple years to complete, most probate does not. Many estate planning attorneys help their clients avoid extensive probate through mechanisms such as a revocable living trust. This trust type allows the property in the trust to pass outside of probate. Other ways to avoid probate are titling property with survivorship features or adding beneficiaries on accounts, such as an IRA. Knowledgeable estate planning attorneys use these mechanisms and entities to keep the probate process to a minimum. These entities may include:

  • Annuities, life insurance policies, and retirement funds with named beneficiaries
  • Pay-on-death or transfer-on death-accounts
  • Property in joint tenancy with rights of survivorship
  • Property held as tenancy by the entirety
  • All property held in a legal trust

Most individuals seek to minimize the probate process when creating their estate plan. This best practice is suitable for larger and more complex estates as probate can become expensive and significantly decrease your estate’s inheritable value. Even smaller value estates using the entities and techniques for direct transfer or property outside of probate can benefit. Talk over your wishes with your estate planning attorney to create a plan that can minimize probate. If you are already a named personal representative and the existing estate plan is murky or without the presence of a will, a probate lawyer can help you assess the best path forward to accomplish the probate process with minimal loss to the estate’s value. 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.

Elder Law, Estate Planning

The Probate Process Explained

SchulzeLawGroup

The probate process involves authenticating the deceased individual’s will, assessing the assets, settling debts and taxes, and overseeing the allocation of the inheritance. After an asset-holder dies, the court will appoint a valid will’s executor to administer the probate process. In the absence of a will, the court will appoint a state administrator to handle probate. Probate law varies by state, but there are steps in the process that are common.

First, an executor is appointed and is normally the person named in the will. It is the executor’s responsibility to initiate the probate process. An executor can be a family member, a financial advisor, or any person the testator deemed capable of administering their estate. The executor files the will with the probate court, which initiates the probate process. A court officially appoints the executor as named in the will, giving the executor legal authority to act on the testator’s behalf.

The executor’s function is to locate and oversee all of the estate’s assets and to determine each asset’s value. The majority of the deceased’s assets are subject to the probate court, where the deceased lived at the time of their death. Real estate is an exception, and probate may extend to any county where the real estate is located.

The executor will pay any taxes and debts owed by the deceased from the estate. A notice of death is published, and creditors are given a limited time to make claims against the estate for any money owed to them. If the executor rejects the claim, the creditor may take them to court, where a probate judge will determine the debt’s validity. The executor is responsible for filing the deceased’s final, personal income tax returns. The executor’s last task, via court authorization, is to distribute what remains of the estate to the beneficiaries.

Probate is required for any asset or account that does not have a joint owner or beneficiary named.  If a joint owner or beneficiary is named, then title changes automatically and probate becomes unnecessary.

If a person dies without a will, they are said to have died intestate. An estate can also be deemed instate if the will presented to the court is found to be invalid. The decedent’s assets of an intestate estate follow a similar probate process, beginning with the appointment of an administrator. An administrator functions like an executor, receiving all legal claims against the estate, paying outstanding debts, and the decedent’s taxes.

Administrators must also seek out legal heirs, including surviving spouses, parents, and children. The probate court will determine the distribution of the estate among its legal heirs. In the absence of any family or other heirs, remaining assets go to the state.

The more complex or contested an estate is, the longer the probate process can take to finalize. The longer the process, the higher the cost. Probate without a will typically costs more than probate with a valid will, but neither scenario is inexpensive. Probate court files an estate’s assets as a matter of public record, so if you want to keep your estate private, it is best to pursue other estate planning options such as a trust. 

As estate planning attorneys, we can help you determine what planning tools are best for you. Contact us to schedule time for a private conversation to further determine how we can help. Please contact our Reno office by calling us at (775) 853-5700.

Estate Planning

Who Does a Probate Lawyer Represent?

SchulzeLawGroup

Knowing the lawyer’s role, whether you are the Executor or an heir of the probate estate, is one of the first steps you should take at the beginning of the probate process. One of the biggest sources of conflict in probating the estate is understanding the role of the lawyer hired by the Executor of a probate estate. Many Executors do not understand the probate process and leave the tasks up to the lawyer. The heirs of the estate may hear only from the lawyer or may hear the Executor say, “This is what the lawyer says we have to do.” This often raises the question, does the lawyer owe a fiduciary duty to the heirs of the estate since the Executor owes a fiduciary duty to the heirs?

The answer to that question depends on the state in which the estate is being probated. To be clear, this question is specifically about whether a lawyer owes the heirs of a probate estate a fiduciary duty, and not whether a lawyer owes a fiduciary duty in other contexts, such as to the beneficiaries of a trust when hired by a trustee, or a ward when hired by a guardian or conservator. The answer varies depending on each different circumstance.

Also, before answering the question, it is helpful to have an idea of some common activities created by fiduciary duties in the context of probating an estate:

  • Duty to communicate: a duty to notify the beneficiaries the estate exists, identify the Executor, provide a copy of the inventory, provide copies of court filings, generally explain documents that require a beneficiary’s signature, etc. This duty to communicate is not the same thing as an attorney-client relationship, which means there is no attorney-client privilege and the attorney cannot give legal advice.
  • Duty to account: provide regular estate accountings, which includes explaining funds paid out of estate accounts for expenses.
  • Duty to treat all beneficiaries equal: distribute estate funds at the same time, if a question arises as to how something in the Will is to be interpreted the attorney cannot interpret it, the court must interpret it.

Turning back to the question, whether the lawyer owes a fiduciary duty the heirs of a probate estate depends on the state in which the estate is being probated. Only a few states require the lawyer to meet the same fiduciary duty to the estate heirs as the Executor. These states believe that since the Executor owes a fiduciary duty to the heirs and the lawyer owes a fiduciary duty to the Executor, the duty flows from the Executor to the lawyer.

Most states, however, take the position that the lawyer does not owe a fiduciary duty to the estate heirs. These states view the fiduciary duty owed by the Executor to the heirs as unique from the fiduciary duty owed by the lawyer to the Executor. Also, these states want to maintain the Executor’s ability to have protected communication with the attorney.

There is a small third set of states, including California, New Mexico, and Illinois, that apply a balancing test to determine who was the actual intended beneficiary of the attorney-client relationship, the Executor or the heirs? Each state has established their own test criteria, but some common questions the courts ask include: who was the intended beneficiary of the attorney’s services, the Executor or the heirs; what was the foreseeability of the harm to the heirs as a result of the malpractice; and what was the proximity of the misconduct and the damage to the heirs?

If you are the Executor hiring the attorney, ask what the law is. If you are an heir of the estate, the lawyer should give you some guidance. If the probate estate is in one of the majority states, the first letter from the attorney should start with a sentence that reads, “I have been retained by Mr. Smith, Executor of the Estate of Ms. Smith. It is important that you understand I do not represent you.”  Otherwise, call and ask.

Everyone’s goal should be for the settling of the probate estate to go smoothly. Understanding the lawyer’s role will go a long way towards achieving that goal.

If you have questions or would like to discuss your personal situation, please don’t hesitate to reach out.