Hasta La Gadget!

My condolences if you are reading this commentary having lost a loved one.

Estate administration involves the probate of the decedent’s estate and typically includes three broad actions: 1. Asset collection, inventory and appraisal; 2. Collecting and paying debts and taxes and; 3. Distributing the remaining assets to beneficiaries. This process, depending on the particular situation, may occur with a will or without a will (intestate) and may occur subject to the jurisdiction of a probate court or outside of a probate court. This comment provides a very broad and brief educational overview of this process. Involve experienced legal counsel in estate planning and estate administration.

Pre-probate matters include a survivor addressing the funeral and burial, obtaining multiple official original copies of the death certificate, locating important documents such as motor vehicle titles, etc., and opening any safety deposit boxes. Finding passwords and accessing computers, phones and numerous electronic accounts is an increasingly significant problem. Keep important documents, password lists, (including keys to safety deposit boxes, storage units, etc.) where a survivor may easily locate them. A modest amount of estate planning will save a survivor significant worry and expense.

More advanced estate planning will allow assets to automatically transfer with survivorship and co-ownership provisions or gifting. Highly advanced estate planning addresses tax issues, trust funds, elderly financial planning, and complex transfers.

Life insurance, bonds, and other sources of financial liquidity (readily available cash money to pay immediate expenses) should be considered in all circumstances.

One needs an up-to-date valid will. The will should be reviewed and possibly amended if the following events occur: 1. the adoption or birth of children; 2. the death of a spouse or divorce; 3. remarriage; 4. significant financial or business ownership changes; 5. any other significant life changes or a desire to change beneficiaries. Also prepare the common medical directives that are available online or from a hospital. Have the will and directives readily accessible in a location that is known to survivors.

In the absence of a will (intestate) state law (and a judicial proceeding) determines the identity of the heirs. In the absence of living relatives the estate transfers to the government (escheat). Escheat is rare but may occur. The intestate process is typically something to avoid by pre-planning. Likewise, probate court procedures are required in cases involving lost wills or will contests. Family settlement agreements may be recognized by state law to simplify many of these issues.

The will may name an executor to conduct the estate administration. Some states allow the testator (maker of a will) to give the executor great independence to act with minimal judicial supervision (independent administration). The alternative process is termed dependent administration with detailed court supervision and requirements.

Typically state law allows any adult without a felony conviction to be selected as an executor, even if living out-of-state. Selecting an executor is a very personal and important decision. A spouse, a trusted attorney, family members, or personal friends are all possibilities. Bank trust departments may act as executors. Discuss executor service with the potential executor prior to naming this individual in the will. An executor may always refuse (or be unable) to serve so many wills also provide for an alternative.

In the absence of an executor, the probate court appoints an administrator according to state law. Once the executor or administrator is recognized, the probate court issues a document entitled “letters of administration” (sometimes called “letters testamentary”) that allows the selected person authority over assets and to conduct the responsibilities associated with the probate process. The details of steps 1-3 listed above are controlled by state law. Many states allow alternatives to probate if the major asset is a homestead or the estate is valued below a specified dollar amount.

The compensation of executors or administrators is determined by state law with 5% of the gross estate’s fair market value being sometimes specified. Some states allow the will to state that no compensation be paid. Of course, individuals may be unwilling to serve without compensation. The payment of expenses associated with probate is in like manner determined by state law.

The simplest estates may require tax forms to be filed even if no taxes are owed. The federal estate tax return is typically due nine months after the date of death but an extension may be available. Tax filings may also start the time period for the IRS to assert claims. Thus, even a no tax owed filing is frequently recommended. Consult a CPA or tax professional.

Also, both potential creditors and potential heirs may need to be notified by posted notices or advertising under state law. This is in addition to direct notice being provided known creditors and heirs. Inventories of property and lists of creditors may need to be provided to the probate court.

Executors and administrators should typically timely apply to the probate court to close the estate after steps 1-3 above have been completed. A formal closing starts the time period in which dissatisfied parties may assert personal claims against the executor or administrator. However, prior to closing the estate must be fully distributed and closing ends the jurisdiction of the probate court. Sometimes a closing is delayed because of a concern that unknown assets or heirs may appear.

This comment provides only an educational overview of a complex subject and is not intended to provide legal advice. One should consult experienced professionals in all specific estate situations.