Probate Preparedness

When a loved one passes away, surviving family members are often left with a lot of details to wrap up on top of coping with their own grief. One process many will face during this already difficult time is Probate.

Probate is a legal procedure to wrap up the affairs of a deceased person, including settling remaining debts and ensuring assets are passed to his or her beneficiaries. Depending on the assets and individuals or entities involved, probate cases may be relatively simple and inexpensive or very complex, confusing, and costly. The nature of the case depends on how many assets and debts must be resolved and how many heirs and beneficiaries are involved, but it can also be simplified or complicated by how well the deceased person planned prior to death. This edition of Elder Counselor gives a brief overview of how Probate works, tips for proactive planning that can make Probate more manageable, and tips to help those responsible for settling an estate navigate the Probate process.

How Probate Works

When a person dies, some of his or her property may pass by operation of law or contract into the hands of predetermined beneficiaries or heirs, but property for which there is no right of survivorship or named beneficiary is typically subject to Probate. Often legal procedures are necessary to make sure that the property in the probate estate passes into the intended hands. Ensuring that this happens can be especially challenging because many people do not have an understanding of how all of their property is officially titled or owned and how it will pass at death. Many people do not know which items of their property are subject to Probate and which are not. Furthermore, surviving family members and creditors may disagree about how the property should be transferred, leading to even greater confusion, litigation, and expense.

It is through Probate that all of these issues are sorted out and resolved. The process typically lasts a minimum of six months and may take many years to complete. Probate is opened in the county where the deceased person last resided. A Probate case may be opened by close relatives or beneficiaries of the deceased person, a nominated Personal Representative, or creditors of the deceased. In every Probate case, the court appoints a Personal Representative to manage the case. Generally the Personal Representative is the person nominated as executor (males) or executrix (females) of the deceased’s Last Will and Testament. However, if that person is unwilling or unfit to serve as Personal Representative or if there is no Last Will and Testament naming an executor, the court may appoint the surviving spouse, adult child, next of kin, creditor, or other interested party, such as an attorney or financial professional.

The Personal Representative has a lot of responsibility; he or she has a duty to notify all heirs or beneficiaries under the Last Will and Testament, and potential creditors; protect and collect all assets of the estate; pay the expenses of estate administration; pay funeral costs and creditors; and distribute remaining property according to the Last Will and Testament or the laws of the state in which the Probate case has been opened. In carrying out all of these duties, the Personal Representative must keep good records and follow the rules of how estate property is appropriately handled. Failure to do so may subject the Personal Representative to personal liability.

Probate can be a huge burden on the family and on the individual named as Personal Representative. However, there are steps a person can take prior to death that will help smooth the path for loved ones left behind. A Personal Representative who starts with a well-organized foundation and who equips him or herself with the proper resources to resolve required tasks will find Probate much more manageable.

Tips for Planning to Make Probate Manageable

1. Create a sound Estate Plan. Good estate planning aided by a certified elder law attorney or experienced estate planning attorney is an essential step for ensuring that Probate goes as smoothly and quickly as possible. Although it is uncomfortable to think about and plan for death, you should not procrastinate in creating your Estate Plan; for the sake of yourself and your loved ones, it is better to prepare for the unexpected while hoping for the best. Professional legal guidance is a key element to ensure that an Estate Plan accurately reflects your current wishes, that named beneficiaries are consistent across all legal documents, and that there are no unwanted repercussions due to conflicts among those documents. Frank discussions with your legal counsel are a must, including full disclosure about your assets and liabilities. Discussing your estate planning options with trusted loved ones is also advisable.

Property for which beneficiaries are designated or where property is owned jointly with a right of survivorship is not subject to Probate, but generally property which is owned individually and is without named beneficiaries is subject to Probate. Properly funded Revocable Living Trusts, Irrevocable Trusts, Special Needs Trusts, payable-on -death or transfer-on-death designations, beneficiary designations, deeds, and other arrangements using joint ownership with right of survivorship are all mechanisms for avoiding Probate. Therefore, by understanding how property is owned and with careful planning to ensure assets have beneficiaries, etc., an individual can go a long way toward sparing survivors from a complicated Probate process.

2. Keep beneficiary designations up-to-date. Establishing an Estate Plan is very important, but it is only helpful as long as it is up-to-date. Any major family changes (marriage, divorce, birth, death, retirement, chronic debilitating illness, etc.) should trigger the review and possibly update of estate planning documents as well as other documents with named beneficiaries (including Human Resources forms, 401k, 403b, IRA retirement accounts, employee benefit accounts, and any other work and personal accounts). If a named beneficiary leaves the family or a would-be beneficiary joins the family but the estate planning and financial documents are not current, the property may not pass into the hands of the intended person(s). A common mistake occurs when a life insurance policy names a spouse as beneficiary even though the spouse has been deceased for many years. Failure to update that beneficiary designation results in the need to open Probate.

3. Choose your executor with care. Since the executor named in the Last Will and Testament is often (although not always) preferred for nomination as the Personal Representative, it is important to name an executor who could, if called upon, handle the duties of Personal Representative in a responsible way. Think about choosing someone you would trust with a signed blank check. If it seems likely that there will be conflict among beneficiaries or other parties if and when your estate goes into Probate, it may be prudent to name an executor who is unlikely to exacerbate strife.

4. Make sure your important documents are accessible. Whether or not the Personal Representative of your estate is one of your close family members, your survivors will still be responsible for finding information about your legal documents, accounts, and property. Taking the time to (A) organize all of your important documents, key contacts, and passwords and (B) inform your most trusted family members about how to access this information will save your survivors a tremendous amount of trouble when you are gone. This can be an uncomfortable conversation to initiate with your loved ones, but they will be grateful for your forethought and consideration when the time comes to retrieve the information necessary to settle your estate.

5. Seek expert help before trying to shelter assets to avoid Probate. Many people have heard that it is possible to avoid Probate altogether by sheltering their assets in a trust. In some cases this can be an effective strategy; however, setting up a Revocable Living Trust or Irrevocable Trust is a complicated and sometimes costly process, and doing so may not necessarily help you to meet your financial goals unless it is done correctly. Before establishing a trust to avoid Probate or for other reasons, consult with an experienced attorney who specializes in estates and trusts to gain a complete understanding of the pros and cons of using a trust and to ensure that your trust is compatible with your needs and objectives as well as your overall Estate Plan.

Tips for Serving as a Personal Representative

1. Get representation. Just because a Last Will and Testament nominates you as executor/executrix does not mean you are required to serve as Personal Representative. If you are uncomfortable with serving as Personal Representative, you may refuse, and the court will appoint someone else. If you are comfortable serving but also prudent, you may hire an attorney to represent you and guide you through the process. This cost is typically approved by the court and may be paid by the estate of the deceased. This cost may be well worth it for the Personal Representative because a Personal Representative who makes a major mistake can be held personally liable and responsible for that mistake to the creditors and beneficiaries or heirs of the estate: not a pleasant thought! A Personal Representative nominated in a Last Will and Testament may also ask that an independent professional be appointed instead. This step may be beneficial or even necessary in cases where there is a conflict of interest (for instance, where the Personal Representative is also a beneficiary and there is strife among more than one beneficiary). In some cases, the person elected to serve as Personal Representative should be prepared to hire two different attorneys: one to represent him or her as beneficiary, and another to represent him or her as Personal Representative.

2. Learn and follow the rules carefully. As with any case that goes to court, Probate is riddled with rules controlling every step of the process. It is essential for the Personal Representative to learn and follow the rules for the county in which Probate has been opened and to be aware of the deadlines pertaining to the case. Every county is slightly different, so if you are representing yourself it is a good idea to contact the Probate Court Clerk for the county where the decedent resided prior to death or in which the decedent owned property to learn the rules that may apply to the case.

3. Keep good records of Probate transactions. As the Probate case progresses, the Personal Representative will be expected to make payments from the estate to beneficiaries and/or creditors. The Personal Representative should keep careful records of all transactions so that he or she can accurately report the progress of the case, along with substantiating evidence, to the court.

4. Be cautious about making payments. If there is a chance that the Probate estate will be insolvent or if there is likely to be any discord among beneficiaries of the estate, descendants, creditors, the Personal Representative, or any other parties involved in the case, then the Personal Representative should be exceptionally cautious about paying anything from the estate funds or out of pocket without first consulting an attorney.

5. Seek professional guidance. Probate is often complicated and daunting, but just because you have been appointed Personal Representative does not mean you have to handle everything alone. A good Personal Representative will enlist the help of experienced and qualified legal and/or financial professionals to navigate the process. An attorney who is experienced in Probate can help you understand what types of property are subject to Probate and guide you through the process, and a Certified Public Accountant can provide sound tax advice.

Conclusion

At Elder Law of East Tennessee, Amelia Crotwell specializes in handling estate planning and Probate matters as a Certified Elder Law Attorney. Associate Attorney Sarah Malia, who works closely with Amelia, handles many of the Probate matters. It is our aim to make Probate as simple, streamlined, and affordable as possible. If you are thinking about your estate and you want to make Probate as easy as possible for your Personal Representative and family, or if you are a nominated Personal Representative, give us a call and let us see how we can help you manage Probate with minimal stress and worry.