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Monday, November 7, 2016

Frequently Asked Questions About Probate

Joseph D. FairbankWhat is probate?

Probate is the court-authorized process for proving a will or distributing an intestate estate. When a person dies, they usually leave assets behind that are officially titled in their name. The most common examples of this are real estate, financial accounts, and vehicles. For example, if you own a house when you die and your spouse or children try to sell the property, they won’t be able to do so without your signature. Proving that you are deceased won’t waive this requirement—someone has to be authorized to sign the deed on your behalf to convey ownership of the house. This is the most important thing the probate process does: it authorizes someone to sign in your name, pay your debts, and distribute your property to your loved ones. The person authorized to settle your estate, your Personal Representative, is required to follow your directions in your will, if you have one.

Don’t I want to avoid probate?

In some states, the probate process is long, complicated, and very expensive. But Idaho follows the Uniform Probate Code, which has greatly simplified the process and reduced the time and cost of probating a typical estate. However, there are still factors that can motivate you to do planning to avoid probate. One such factor is concerns about privacy. If you go through probate, then your will must be filed with the court, and will become public record. The laws of probate also require a full inventory of your assets, but the inventory doesn’t always need to be filed with the court. If you don’t want your will (and possibly a list of your assets) to be available to the public, then you will want to plan ahead to avoid probate.

Another factor is ownership of real property in other states. If you own real property in more than one state when you die, your estate will need to be probated in every state in which you own property, multiplying the cost of probate. This can make things especially difficult (and expensive) where the property is located in a state with complicated probate laws, such as California or Illinois. If you own real property in more than one state, consider putting the property into a trust to eliminate the need for multiple probates.

Who should be my Personal Representative?

If you have a will, it will designate a person as your Personal Representative. You should choose someone responsible, whom you trust to follow your wishes in your will and treat your beneficiaries fairly. If you anticipate disagreements about division of your property, you should consider your Personal Representative’s relationships with the other beneficiaries and their ability to deal with that kind of pressure. Your Personal Representative does not need to be a beneficiary of your estate, though they certainly can be. You can even select a professional Personal Representative to handle the estate. A professional is paid for their time, but under certain circumstances their added experience and impartiality can make a big difference in making the division of your estate run smoothly.

If you don’t have a will designating a Personal Representative, then any related party may apply to be the Personal Representative. Competing applicants are measured based on their degree of relationship to the deceased. Spouses are given preference, then children or parents.

Do I have to go through probate more than once?

The general rule is that each person’s estate must be probated once, but there are exceptions. Some estates don’t have to be probated at all, such as where all assets of the estate are held in a trust, or where the estate is small enough to be handled by affidavit or summary administration (see below). Sometimes a probate can be effectively postponed, such as when one spouse of a married couple passes away and the entire estate goes to the surviving spouse. In this case, there’s typically no need for probate during the surviving spouse’s lifetime unless the surviving spouse takes some action requiring probate, such as a sale of real estate. Often the couple’s heirs can simply do a joint probate after the second death.

A second or third probate will also be necessary where the deceased person owned real estate in more than one state (see above).

Are there any shortcuts to probate?

If your estate is small enough, the estate can be essentially probated by summary administration. There’s also an abbreviated procedure where the spouse is the only beneficiary of the estate. Whether one of these shortcuts applies to your probate depends on the specific assets and liabilities of the estate. Talk to a probate attorney to see what approach best applies to your circumstances.

How can I keep my loved ones from fighting?

We’ve all heard stories of families that fell apart over who gets to keep Dad’s favorite hat, Grandma’s wedding band, or the mountain cabin. It’s difficult to make rational decisions about ownership of property during the emotional weeks following the death of a loved one, especially when the property holds high sentimental value to everyone involved. The emotionally charged nature of this process is unavoidable, but there are ways to plan or work around the worst of it.

The most important thing is to be clear in your will or other estate plan documents what your wishes are. If you clearly say your brother should inherit your best saddle, then your other beneficiaries will probably respect your wishes. Most wills provide for a separate “personal property memorandum” that allows you to keep a list of items and who should inherit them. Avoid vague devises like “my piano to whoever plays the best,” which can invite competition and resentment. And don’t be afraid to talk to your children and other beneficiaries about what you’ve decided. If they’re going to be surprised or disappointed, it’s better for them to hear it from you.

After a person’s death, during the probate process, there are ways a Personal Representative can deal fairly with multiple interested beneficiaries. Some groups of beneficiaries gather and take turns picking single items from the estate, following a fairly determined order or drawing names from a hat. Other families hold an auction with fake money. If you are a Personal Representative dealing with fighting family members, talk with your probate attorney about ways to settle things fairly.

What records do I need to keep?

If you are planning for your own probate, you should keep a record of your major accounts and property in a safe place. It’s also a good idea to keep a list of important usernames and passwords for online accounts, as well as combinations to any safes. Many Personal Representatives have been frustrated by a will locked in a safe, or important papers stuck in a safety deposit box. Plan for your Personal Representative to be able to access your important documents.

If you are a Personal Representative of an estate, you need to keep track of the deceased person’s assets from the date of death until the assets are distributed to the beneficiaries. Account for money spent on the funeral, taxes, final medical expenses, and miscellaneous bills. You will eventually need to provide the beneficiaries with a final accounting that shows what assets the deceased owned at death, expenses paid, and the division of remaining assets among the beneficiaries according to the will or laws of intestacy. Nothing frustrates a lawsuit against a Personal Representative better than clear, thorough recordkeeping. 

Do Personal Representatives get paid for their time?

The Personal Representative is entitled to “reasonable compensation” for his or her services. What constitutes reasonable compensation depends on the Personal Representative’s professional background. Most Personal Representatives have no training or experience in this type of work, and their time is compensated at a nominal hourly rate, around $10 per hour. If he or she is a CPA or attorney, or if he or she is a professional Personal Representative, then compensation will be higher. This compensation is considered an administrative expense of the estate and will be paid out of the entire estate, before dividing assets between the beneficiaries.

If you are serving as a Personal Representative, be cautious not to overpay yourself or pay for an unreasonable amount of time. Beneficiaries have been known to sue the Personal Representative for taking unreasonable compensation.

Do I really need a probate attorney?

Yes. If your loved one died and you are serving as Personal Representative, call a probate attorney today. It’s better to take control of the situation early rather than waiting until after family members have begun taking matters into their own hands. While it is possible to handle an estate without an attorney, it is very easy to make mistakes that open you to liability later or cause problems within the family. The cost of a probate attorney usually amounts to a very small percentage of the estate and makes the process go far more quickly and smoothly.

It’s also a good idea to get an estate planning attorney to help you prepare your own will or trust. See my article, What Happens If I Die Without a Will?

Joseph D. Fairbank at 9:34 AM
Estate Planning
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