Where there's a Will, there's a way
There are many challenges to navigate when sorting through the rubble of losing a loved one, and one of the more difficult components is the Estate.
To most, the word “Estate” brings thoughts of inheritances such as lump sums of money or grandma’s jewelry… but the fact of the matter is, there is so much more to it than that. Even with the best and most thorough plans in place, there are unavoidable pieces that are not commonly discussed. Estate planning and utilization is actually a combination of multiple pieces which includes the Probate court system, the use of Trusts and asset planning, and Estate planning (or a Will). In this 3 part series, we will break down each piece and talk about some tips to make the process as seamless as possible.
“Probate” is the court supervised process in which your assets, debts, and final wishes are are authenticated and executed.
A common misconception is that if you have a will, you avoid the probate court process, but the truth is, everyone goes through probate, its just a matter of how much time (and how much money) you spend there. On average, a quick trip through probate, will take 6-9 months, and that is assuming everything goes according to plan. More complex situations can take as long as a year, and on the outside, the whole process could take as long as 2 years. It can also be quite costly, averaging between $5,000- $12,000 for a completed probate process.
If you have a Will, the probate court will review and validate final wishes (meaning how you planned to dissolve your assets and distribute inheritances). This process also includes legally approving the named executor/administrator of the Estate plan. The supporting court documents necessary for each of these is usually submitted by your estate lawyer to the local probate court in the jurisdiction you live in.
If you don’t have a Will, things become more far more complicated. In that process, known as “Estate Intestate”, the courts will ask for documentation of any solely owned assets and debts to determine the worth of the Estate. A “next of kin” or beneficiary then can petition to the court to be named Executor of the Estate Intestate. Sometimes the petition to be named administrator will be contested by another family member or otherwise “interested parties” in which case, a “Designation of Administrator” hearing is held. In that instance, each party petitioning for decision making rights, will state their case to the judge and a determination of administrator will be decided. Of course, that decision can be appealed, but all of these pieces add time and cost to your process.
Regardless if there is a Will to execute or the Estate is Intestate, the probate process has a timeline of things to be done. Lets take a closer look at the steps involved with the probate process.*
1. Obtain a copy of the Death certificate and file it along with the Will (if one exists), and a “Petition of Will” within 30 days of the death. The Petition of Will is a court document that basically asks for permission for the Will to be accepted by the court. In the instance there is no Will, the same document can be used to inform the court of such.
1 A. File “Appearance of Attorney”. This document informs the court and all interested parties who is legally representing the Estate.
2. Send waivers to beneficiaries and/or heirs. This is the document that allows people to contest the Will. Here is where time can be added if there is disagreement about how things should be distributed or if multiple people wish to stake claim over specific items. This is also where interested parties can object to whomever is petitioning for/named as Administrator. A hearing would be held at this point and must be resolved before anything else can be completed.
3. File inventory. A legal itemized listing of all SOLEY owned properties and assets is complied. This is anything from Cars, houses, bank accounts, businesses, and personal effects with an assigned nondepreciating monetary value such as gold jewelry, bonds, fine art, and similar. Once this list is together, it is submitted to the court who then assigns value to the estate.
3 A. Retrieve “Certificate for Land Records”. If the deceased owned real estate, you have to notify the courts and the municipality where the property is of the death within two months from the death date. It is at this point that the “Appointment of Fiduciary” would be assigned by the court, giving permission for the administrator to legally sell the property if necessary.
4. Pay expenses & claims. Once the inventory is submitted, the court issues a publication, usually in the local newspaper, to notify creditors or other interested parties of the death and allowing them the opportunity to come forward and submit a claim for payment on any outstanding debts. They have between 30-90 days to file the claim or they forfeit the right for payment from the Estate. After that waiting period, known claims are paid based on the previously assigned value of the Estate. Then court costs, attorney fees, publication cost and other probate associated expenses are paid. Basically they skim their cut off the top before and heirs or beneficiaries can be paid.
4 A. Open an Estate checking account. This is something your lawyer would do if you have representation. If not, you would go to your preferred financial institution, and ask to open an estate checking account account. You will need to bring a certified copy of the Death certificate and the “Appointment of Administrator” document from the court in order to do this.
5. File state and federal Estate tax. Not every case has to file, usually it’s when the Estate is valued over a certain amount. The state tax must be filed within 6 months and the federal is filed with 9 months of the death.
6. File final financial report. This is essentially an accounting document, kind of like balancing a checkbook. It lists the initial assigned worth, it shows the deductions from paid claims, expenses and taxes, and it shows all the proposed distribution of assets. The court just wants you to “show your work”.
7. Distribute the assets. Once the financial report is approved by the court, assets can be distributed to heirs and beneficiaries. This can be done by issuing checks from the Estate account, transferring funds into pre established trust accounts, transferring ownership of physical items like re-titling cars, or through simply giving the tangible items to the designated recipient.
8. File “Affidavit of Closing of Estate”. This is the formal request to the court to close the Estate, meaning the Will has been fully executed or the Estate Intestate has no more financial obligations. The court will approve the request, but it is not instantaneous, in fact this is one of the more lengthy pieces, as it can take several weeks to receive notice of closure. Once the Estate is closed, all decisions and actions are final. An Estate cannot be further contested or reopened unless new assets are discovered. In that rare instance, you basically start over. This is why the inventory is crucial to a successful and “streamlined” probate process.
Probate in general isn’t the end of the world, it’s more time consuming and annoying than anything else, but it does serve a purpose. The probate court process ensures that things end up where they’re supposed to after someone dies.
*Connecticut Probate court process was used to establish a generic outline of the steps involved. These steps may vary slightly from state to state. To find out more about the probate court process in your area, visit this resource HERE.
There are ways to fast forward through most of the probate process, one of those being setting up Trusts. In our next discussion we’ll cover what a Trust is and how it’s beneficial.