8. Probate Process

Question 1

Probate process common in all states

Answer 1

Probate court grants family allowance to support decedent’s spouse and minor children during estate administration process. Surviving spouse is usually named petitioner, but any interested party may file petition and initiate probate process

Homestead and exempt property allowance protects family property from decedent’s unsecured creditors

• Testate: will and petition to have will admitted is filed with probate court and initiates probate administration.
• Intestate: petition to appoint a personal representative / o/ fiduciary initiates probate administration

-Once will is admitted/individual in named as personal representative, then all interested parties must be notified and is usually published in a local newspaper. To avoid litigation by creditors, attorneys and estate reps should provide notice to all creditors, who are given 6 months to file a claim.
If an interested party is not given notice, the personal representative’s actions can be challenged. In some states, an interested party can waive the written notice requirement.

-Letters testamentary given by probate court to those appointed by the will/court administrator to act on behalf of the estate as a fiduciary: Executor/Executrix

-Proving will is valid requires a hearing or signed statement from witnesses: decedent intended document to serve as last will and testament and signed it in the presence of 2+ disinterested witnesses and witnesses signed and acknowledged in the presence of maker of will / self-proving affidavit.

Personal property is probated in the state of domicile/ state of the decedent’s personal residence. Real property is probated in the state where it is located or situs.

-Executor/executrix pays estate taxes (fed and/or state) and/or inheritance tax (state) and must file accounting documentation with probate court that assets have been distributed and creditors claims have been filed and paid.

-Probate court issues deed(s) to transfer title to real estate: irrevocable and beneficiaries /heirs need to sign written receipt

-Probate fees: appraisal fees for probate assets, court filing fees, attorney’s fees, o/ administrative expenses

-Petition to Discharge: after all claims/debts/taxes have been paid, property distributed and final accounting/report has been filed, petition to discharge personal rep is filed, as well as release of personal rep bond/oath

-Once estate is probated, Court approves discharge and probate process is complete

Question 2

Reasons to avoid probate

Answer 2

• Avoid publicity
• time delays due to property disputes, tax return complications, accounting errors and complications involving property receipts
• Costs (usually percentage of probate estate, although rep may be able to negotiate hourly rate)

Question 3

Probate Assets

Answer 3

Separately owned assets/property interests that are probate assets:
-Fractional interests held in Tenancy-in-Common property
-Community property
-Property passing from a will into a Testamentary Trust
-Property transferred by a Pour-over will into a trust
-Homestead and exempt property allowances

Question 4

Go probate free with TLC / Will substitutes

Answer 4

-Trust
-Law- in account titled JTWROS
-Contract- stated beneficiary

Question 5

Trust

Answer 5

-Settlor/trustor/grantor sets up trust terms, executes and transfers property to person (trustee)
- Trustee responsible for administering the terms of the trust as fiduciary for
-Beneficiaries

Trust corpus (real assets/ intangible eg copyright/anything of value), bound by trust document and don’t need to go though probate

-Upfront costs, flexible to cater to different purposes

Question 6

Operation of Law

Answer 6

Ownership titling: JTWROS, Tenancy by the Entirety, Payable on Death (Totten Trust), assets in TOD brokerage account, life estates, gift causa mortis/general power of appointment/property included in decedent’s gross estate subject to 3 year rule

Question 7

Contracts

Answer 7

retirement assets including pension plans and IRAs, annuity proceeds, nuptial agreements, buy/sell agreements, and deeds of title that pass a present interest all avoid probate

Exceptions to LI policies with named beneficiaries:
if beneficiary=decedent’s estate or if owner is not the insured, then at death, the replacement cost of policy is included in decedent/owner’s estate and subject to probate

Question 8

Reasons for probate

Answer 8

-reasonable settlement of beneficiary disputes: probate process can verify legal title for real estate title disputes
-publicity for the decedent, particularly for significant charitable contributions
-and most importantly, once probate has been closed, all future creditor claims against the estate will be denied

Question 9

Ancillary probate

Answer 9

disposes real estate of the decedent located in a state other than residence.

Question 10

How to avoid ancillary probate

Answer 10

-property will need to be gifted/placed in a trust during lifetime or the owner can own JTWROS with intended heir
(Will cannot avoid ancillary probate procedure)

Question 11

Personal property is probated in the state

Answer 11

of domicile, the state of the decedent’s personal residence.