Executor

How Does a Probate Proceeding Work?

A Will, also known as Last Will and Testament, is a legal document that is used in probate court.  It’s used when a person dies with assets that are in their name alone without a surviving joint owner or beneficiary designated, says the Record Online in the article “Anatomy of a probate proceeding.”

So, how does a probate proceeding work?

How does a probate proceeding work
Probate has been referred to as the law suit you file against yourself after you pass away.

Probate is a judicial or court proceeding, where the probate court has jurisdiction over the assets of the person who has died. The court oversees the personal representative’s payment of debts, taxes and probate fees, in addition to supervising distribution of assets to the person’s beneficiaries. The personal representative of the will has to manage the probate assets and then report to the court.

Without a will, things can get messy. A similar court proceeding takes place, but it is known as intestate succession, and the assets are distributed according to state law.

To start the probate proceeding, the personal representative completes and submits a Petition for Administration with the probate court. Most personal representatives hire an estate planning attorney to help with this. The attorney knows the process, which keeps things moving along.

The probate petition lists the beneficiaries named in the will, plus certain relatives who must, by law, receive legal notice in the mail. Let’s say that someone disinherits a child in their will. That child receives notice and learns they have been disinherited. Beneficiaries and relatives alike must return paperwork to the court stating that they either consent or object to the provisions of the will.

A disinherited child has the right to file objections with the court, and then begin a battle for inheritance that is known as a will contest. This can become protracted and expensive, drawing out the probate process for years. A will contest places all of the assets in the will in limbo. They cannot be distributed unless the court says they can, which may not occur until the will contest is completed.

In addition to the expense and time that probate takes, while the process is going on, assets are frozen. Only when the court gives the all clear does the judge issue what are called Letters of Administration, or “Letters Testamentary,” which allows the executor to start the process of distributing funds. They must open an estate account, apply for a taxpayer ID for the account, collect the assets and ultimately, distribute them, as directed in the will to the beneficiaries.

Now that you know a little about how a probate proceeding works you’re probably asking whether a will contest, or probate be avoided? Avoiding probate, or having selected assets taken out of the estate, is one reason that people use trusts as part of their estate plan. Assets can also be placed in joint ownership, and beneficiaries can be added to accounts, so that the asset goes directly to the beneficiary.

By working closely with an estate planning attorney, you’ll have the opportunity to prepare an estate plan that addresses how you want assets to be distributed, which assets may be placed outside of your estate for an easier transfer to beneficiaries and what you can do to avoid a will contest, if there is a disinheritance situation looming.

Reference: Record Online (August 24, 2019) “Anatomy of a probate proceeding”

What Happens to Credit Card Debts After You Die?

Can you imagine what people would do, if they knew that credit card debt ended when they passed away? Run up enormous balances, pay for grandchildren’s college costs and buy luxury cars, even if they couldn’t drive! However, that’s not how it works, says U.S. News & World Report in the article that asks “What Happens to Credit Card Debt When You Die?” 

What Happens to Credit Card Debt When You Die?
A common misconception is that your debts are wiped out when you die.

The personal representative of your estate, the person you name in your last will and testament, is in charge of distributing your assets and paying off your debts. If your credit card debt is so big that it depletes all of your assets, your heirs may be left with little or no inheritance.

If you’re concerned about loved ones being left holding the credit card bag, here are a few things you’ll need to know. (Note that some of these steps require the help of an experienced estate planning attorney.)

Who pays for those credit card debts after you die? Relatives don’t usually have to pay for the debts directly, unless they are entwined in your finances. Some examples:

  • Co-signer for a credit card or a loan
  • Jointly own property or a business
  • Lives in a community property state (Alaska, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin)
  • Are required by state law to pay a debt, such as health care costs, or to resolve the estate.

A spouse who has a joint credit card account must continue to make on-time payments. A surviving spouse does not need the shock of learning that their spouse was carrying a massive credit card debt, since they are liable for the payments. A kinder approach would be to clear up the debt.

How do debts get paid? The probate process addresses debts, unless you have a living trust or make other arrangements. The probate court will determine the state of your financial affairs, and the personal representative named in your will (or if you die without a valid will, the administrator named by the court), will be responsible for clearing up your estate.

An unmarried person who dies with debt and no assets, is usually a loss for the credit card company, if there’s no source of assets.

If you have assets and they are left unprotected, they may be attached by the creditor. For instance, if there is a life insurance policy, proceeds will go to beneficiaries, before debts are repaid. However, with most other types of assets, the bills get paid first, and then the beneficiaries can be awarded their inheritance.

How can you protect loved ones? A good estate plan that prepares for this situation is the best strategy. Having assets placed in trusts protects them from probate. A trust also allows beneficiaries to save time and money that might otherwise be devoted to the probate process. It also puts them in a better position, if the personal representative needs to negotiate with the credit card company.

Talk candidly with your estate planning attorney and your loved ones about your debts, so that a plan can be put into place to protect everyone.

Reference: U.S. News & World Report (August 19, 2019) “What Happens to Credit Card Debt When You Die?”

Why Would I Need to Update My Will?

OK, great!! You’ve created your will! Now you can it stow away and check off a very important item on your to-do list. Well, that’s mostly correct.  You’ll still need to update your will from time-to-time.

Update your will
Your will should be reviewed every 3 to 5 years and updated as your life changes.

Thrive Global’s recent article, “7 Reasons Why You Need to Review your Will Right Now,” says it’s extremely important that you regularly update your will to avoid any potential confusion and extra stress for your family at a very emotional time. As circumstances change and major life events take place (like the birth of a child or grandchild, the purchase of a home, or retirement, to name just a few), you need to update your will reflect changes in your life. As time passes and your situation changes, your will may become outdated, obsolete or even create confusion when the time comes for your will to be administered.

New people in your life. If you do have more children after you’ve created your will, review your estate plan to make certain that the wording accounts for your new children. You may also marry or re-marry, and grandchildren may be born that you want to include. Make a formal update to your estate plan to include the new people who play an important part in your life and to remove those with whom you lose touch.

A beneficiary or other person passes away. If a person you had designated as a beneficiary or personal representative of your will has died, you must make a change or it could result in confusion, when the time comes for your estate to be distributed. You need to update your will, if an individual named in your estate passes away before you.

Divorce. If your will was created prior to a divorce, and you want to remove your ex from your estate plan, talk to an estate planning attorney about the changes you need to make.

Your spouse dies. Wills should be written in such a way as to always have a backup plan in place. For example, if your husband or wife dies before you do, their portion of your estate might go to another family member or another named individual. If this happens, you may want to redistribute your assets to other people.

A child becomes an adult. When a child turns 18 and comes of age, she is no longer a dependent.  Therefore, you may need to update your will in any areas that provided additional funds for any dependents.

You experience a change in your financial situation. This is a great opportunity to update your will to protect your new financial situation.

You change your mind. It’s your will, and you can change your mind whenever you like.

Reference: Thrive Global (June 17, 2019) “7 Reasons Why You Need to Review your Will Right Now”

Which Debts Must Be Paid Before and After Probate?

Everything that has to be addressed in settling an estate becomes more complicated when there is no will and no estate planning has taken place before someone passes away. Debts are a particular area of concern for the estate and the personal representative. What has to be paid, and who gets paid first? These are explained in the article “Dealing with Debts and Mortgages in Probate” from The Balance.

probate
Knowing which debts have to be paid before and after probate is important.

Probate is the process of gaining court approval of the estate and paying off final bills and expenses, before property can be transferred to beneficiaries. The process of paying the debts of a deceased person can typically begin before probate officially starts.

Making a list of all of the decedent’s liabilities and looking for the following bills or statements is the best way to begin:

  • Mortgages (and reverse mortgages)
  • Home equity loans
  • Lines of credit
  • Condo fees
  • Property taxes
  • Federal and state income taxes
  • Car and boat loans
  • Personal loans
  • Loans against life insurance policies
  • Loans against retirement accounts
  • Credit card bills
  • Utility bills
  • Cell phone bills

Next, divide those items into two categories: those that will be ongoing during probate—consider them administrative expenses—and those that can be paid off after the probate estate is opened. These are considered “final bills.” Administrative bills include things like mortgages, condo fees, property taxes and utility bills. They must be kept current. Final bills include income taxes, personal loans, credit card bills, cell phone bills and loans against retirement accounts and/or life insurance policies.

The personal representative and heirs should not pay any bills out of their own pockets. The personal representative deals with all of these liabilities in the process of settling the estate.

For some of the liabilities, heirs may have a decision to make about whether to keep the assets with loans. If the beneficiary wants to keep the house or a car, they may, but they have to keep paying down the debt. Otherwise, these payments should be made only by the estate.

The personal representative decides which bills to pay and which assets should be liquidated to pay final bills.

A far better plan for your beneficiaries, is to create a comprehensive estate plan that includes a will that details how you want your assets distributed and addresses what your wishes are. If you want to leave a house to a loved one, your estate planning attorney will be able to explain how to make that happen, while minimizing taxes on your estate.

Reference: The Balance (March 21, 2019) “Dealing with Debts and Mortgages in Probate”

Why Do I Need an Executor?

What would happen if someone you were close to, asked you to be the Executor of their estate plan? Would you be honored, or would you be uncomfortable with the responsibility? What do you need to do, when do you need to handle these tasks and how much time will it take?

executor of an estate plan
The executor of your estate will work with an attorney to settle your debts and distribute your assets.

These are the questions often asked about the role of an Executor, as reported in The Huntsville Item in the article “Role of an executor.”

A person having a will prepared is called the “Testator” if male and a “Testatrix” if female. The person they appoint to take care of distributing their assets and carrying out the instructions in their will is called the “Executor” if male and the “Executrix” if female. That person also pays the estate’s debts and taxes. Note that the debts and taxes are not paid from the Executor’s personal accounts, but from the proceeds of the estate.

The Executor of an estate plan has several responsibilities and powers. Therefore, it’s important to choose an individual who is organized, good with finances and knows how to get things done. An Executor could be a person or an institution, like a bank. Here are some things to consider when selecting an Executor for your estate plan:

  • Are they good with handling their own personal business?
  • Do they have some familiarity with your business, finances and property?
  • Are they willing and able to act as your Executor?
  • Do they have the time to devote to serving as Executor?
  • Can they work with your estate planning attorney and your accountant?
  • If you own a business, will they be able to keep it going during a transition period?

There should always be a “Plan B” and perhaps even a “Plan C,” if the first person you wish either cannot or will not serve as Executor of your estate plan. If you do not have a Plan “B” or “C,” the court may name an Executor for you. That could be a person you don’t know, who does not know you, your family or your business.

The Executor’s tasks vary, depending upon the laws of the state. However, in general, these are the Executor’s tasks. Note that an estate planning attorney usually assists with this process.

  • The will is probated, which requires filing a petition with the probate court in the decedent’s jurisdiction.
  • The court issues Letters of Administration to the individual designated in the will to serve as the Executor of the estate.
  • A general notice is given to unsecured creditors giving them a limited amount of time to file a claim with the estate.
  • Notice is given to each secured creditor, by certified or registered mail.
  • Documents need to be gathered, including insurance policies, bank statements, income tax returns, car titles, leases, home deeds, home titles, mortgage paperwork, property tax bills, birth, death and marriage certificates and unpaid bills.
  • The post office, relatives, friends, employers, insurance agents, religious, fraternal, veterans’ organizations, unions, etc., all need to be notified.
  • The personal property of the estate needs to be collected, preserved and appraised.
  • The residence needs to be secured and maintained, including a review of insurance coverage.
  • An inventory of the estate’s assets needs to be prepared.
  • The Executor needs to apply for  an employee identification number (EIN) for the estate’s bank account.
  • Once the EIN number has been created, open a bank account on behalf of the estate and pay all valid debts from the estate account.
  • Determine any tax liability and prepare for a final tax return to be filed.
  • Distribute the assets and property of the estate, according to the directions in the will.

Usually the estate planning attorney handles many of these tasks and works closely with the Executor of the estate. Some Executors are compensated by the estate for their time and effort, but that is not always the case. Talk with your estate planning attorney in advance, about any compensation for your Executor.

Reference: The Huntsville Item (April 13, 2019) “Role of an executor”

When Should I Review My Estate Plan?

As life changes, you need to periodically review your estate-planning documents and discuss your situation with your estate planning attorney.

WMUR’s recent article, “Money Matters: Reviewing your estate plan,” says a common question is “When should I review my documents?”

Estate Plan Review
You should review your estate plan each time a major life event occurs or every 5 years, whichever comes first.

Every few years is the quick answer, but a change in your life may also necessitate a review. Major life events can be related to a marriage, divorce, or death in the family; a substantial change in estate size; a move to another state and/or acquisition of property in another state; the death of an executor, trustee or guardian; the birth or adoption of children or grandchildren; retirement; and a significant change in health, to name just a handful.

When you conduct your review, consider these questions:

  • Does anyone in your family have special needs?
  • Do you have any children from a previous marriage?
  • Is your choice of executor, guardian, or trustee still okay?
  • Do you have a valid living will, durable power of attorney for health care, or a do-not-resuscitate to manage your health care, if you’re not able to do so?
  • Do you need to plan for Medicaid?
  • Are your beneficiary designations up to date on your retirement plans, annuities, payable-on-death bank accounts and life insurance?
  • Do you have charitable intentions and if so, are they mentioned in your documents?
  • Do you own sufficient life insurance?

In addition, review your digital presence and take the necessary efforts to protect your online information, after your death or if you’re no longer able to act.

It may take a little time, effort, and money to review your documents, but doing so helps ensure your intentions are properly executed. Your planning will help to protect your family during a difficult time.

Reference: WMUR (January 24, 2019) “Money Matters: Reviewing your estate plan”

As a New Parent, Have You Updated (or Created) Your Estate Plan?

You just had a baby. As a new parent you’re sleep-deprived, overwhelmed, and frazzled. Having a child dramatically changes one’s legacy and makes having an estate plan all the more necessary, says ThinkAdvisor’s recent article, “5 Legacy Planning Basics for New Parents.”

If you have a baby, estate planning is a must
After you have a baby, putting an estate plan in place is one of the most important and effective things you can do to protect your child.

Take time to talk through two high-priority items. Create a staggered checklist—starting with today—and set attainable dates to complete the rest of the tasks. Here are five things to put on that list:

  1. Will. This gives the probate court your instructions on who will care for your children, if something happens to both you and your spouse. A will also should name a guardian to be responsible for the children. Parents also should think about how they want to share their personal belongings and financial assets. Without a will, the state decides what goes to whom. Lastly, a will must name an executor.
  2. Beneficiaries. Review your beneficiary designations when you create your will, because you don’t want your will and designations (on life insurance policies and investments) telling two different stories. If there’s an issue, the beneficiary designation overrides the will. All accounts with a beneficiary listed automatically avoid probate court.
  3. Trust. Created by an experienced estate planning attorney, a trust has some excellent benefits, particularly if you have young children. Everything in a trust is shielded from probate court, including property. This avoids court fees and hassle. A trust also provides some flexibility and customization to your plan. You can instruct that your children get a sum of money at 18, 25 or 30, and you can say that the money is for school, among other conditions. The trustee will distribute funds, according to your instructions.
  4. Power of Attorney and Health Care Proxy. These are two separate documents, but they’re both used in the event of incapacitation. Their power of attorney and health care proxy designees can make important financial and medical decisions, when you’re incapable of doing so.
  5. Life Insurance. Most people don’t think about purchasing life insurance, until they have children. Therefore, if you haven’t thought about it, you’re not alone. If you are among the few who bought a policy pre-child, consider increasing the amount so your child is covered, if something should happen.

Reference: ThinkAdvisor (March 7, 2019) “5 Legacy Planning Basics for New Parents”

Why Do I Need A Will?

You might ask yourself, “Why do I need a will?” After all, writing a will isn’t exactly one of life’s most pleasant tasks. Maybe that is why only 36% of American adults with children under 18 have estate plans in place.

Why do I Need a Will?
Asking yourself “Why do I need a will” is the first step to protecting your assets and your family.

The Boston Globe’s recent article, “The end may not be near, but you still need a will,” says that estate planning is essential, because dying without a will means that certain property is subject to intestate succession laws. That’s where the state distributes your assets to your heirs according to state laws, instead of your wishes.

Assets for which you’ve assigned a beneficiary, like your 401(k) or life insurance, won’t meet the same end, because these are outside of probate. However, non-beneficiary accounts, like checking accounts or property, could. Even if you’re not wealthy, it’s important to plan ahead. Consider these thoughts:

  • A will. If you have assets that you want to leave to another person, you need a will. It’s your instructions on what should happen upon your death. You’ll also name an executor or a personal representative who’s responsible for tending to your assets, when you pass away. And a will is the only way you can name a guardian to raise your children is you’re unable to.
  • Beneficiary designations. Some assets don’t pass through a will, like life insurance and retirement plans. For these, you must name a beneficiary.
  • Health care proxies and powers of attorney. An estate planning attorney will help you with healthcare directives, HIPAA forms and durable power of attorney. The power of attorney lets someone else handle your legal and financial matters. The healthcare directive lets a trusted person make decisions about your medical care, when you’re unable to speak for yourself.
  • Guardian for minor children. Select a person who shares your values and parenting style, regardless of their financial background.
  • A living will. A living will is a type of advanced healthcare directive. It states your wishes concerning not wanting life-prolonging medical intervention and allowing you to pass away naturally.

Finally, discuss your plans with your family and make certain that your will and other documents are safely stored and easily accessible. You should also be sure that you’ve given your power of attorney and health care agent copies. Your physicians should also have a copy of your health care proxy and living will, and your attorney should keep a copy on file.

Read more about getting your will and other estate planning documents taken care of and becoming a client of Mastry Law here.

Reference: Boston Globe (February 25, 2019) “The end may not be near, but you still need a will”

How Do I Leave My Home to My Family?

Figuring out what will happen to your assets after you pass away, is an unpleasant but necessary task. This ensures that your assets are distributed to the people you want. The publication, the day, recently published a story, “Planning to leave your home to your heirs,” that reminds us that it’s best to begin your estate planning, as soon as possible.

Death can unexpectedly impact young or middle-aged families, and your family may not be sufficiently prepared, if you don’t have a will. Estate planning can make certain that your wishes are clearly stated and executed.

Real estate is frequently given to an adult child, grandchild, or is divided among several heirs. Once you know who will receive the property, discuss your plans with these people to keep them apprised of your plans and avoid any unpleasant surprises.

If you include your home in the will, you can stipulate precisely who should benefit from it. You can also say if you want the home to stay in the family or be sold.

Dividing the interest in a property evenly among beneficiaries might seem fair, but it can also create some unexpected complications. If one beneficiary wants to move into the home and another wants to sell it and split the proceeds, things could get dicey. Discuss this issue with your beneficiaries to resolve this potential conflict in advance. One beneficiary could buy out the other beneficiaries’ shares in the property to take sole possession of it. However, you may need a life insurance policy to be sure that the cash is there for a buyout.

A will is also used to delegate responsibilities to certain heirs. You select an executor to oversee the disposition of your estate after your death.

An outstanding mortgage balance can cause some trouble, when passing on a property. Any debts you have at the time of your death, need to be paid before your estate can be settled. If you were still making mortgage payments, be sure your beneficiaries have a plan to avoid a default. Beneficiaries, a surviving spouse, the executor of estate, or any other party can continue to make payments to your bank to avoid a foreclosure process. There are several ways that your beneficiaries can resolve a mortgage, after they take possession of the home. In addition to just selling the property, they can refinance the loan or pay off the mortgage with any assets they have or receive from your estate. That way, they would own the home free and clear.

Review your will regularly to keep it up to date. Make a change if a beneficiary dies, if your own circumstances change, or if your relationship with an heir goes bad.

You can also transfer your home to a living trust. This lets you use and benefit from the asset while living and then transfer it to beneficiaries upon death. This will avoid the probate process and save heirs time and money. The trust document identifies beneficiaries and determines how the estate will be distributed after death. It can also name a trustee to oversee this process and avoid conflict among beneficiaries.

One downside of a living trust is that any outstanding debts must be taken care of before the home and any other assets in the trust can be transferred to beneficiaries.

If a beneficiary is comfortable with assuming some responsibility for owning your home, you can also update the deed to include them. This can be especially helpful, if your spouse isn’t currently on the deed. This will make transfer of the home easier. If the deed says: “transfer on death,” you own the home outright until your death, then it passes to any beneficiaries you name in the deed. When the deed includes the words “joint tenant with right of survivorship,” ownership of the home automatically transfers to any other co-owners on the deed, when you pass away.

Reference: the day (February 15, 2019) “Planning to leave your home to your heirs”

What is a pour-over will

A Will is an Essential Component of Estate Planning

Drafting a will is a fundamental and essential component of estate planning.

Drafting a will with an experienced estate planning attorney helps avoid unnecessary work and perhaps some stress, when a family member passes away. A will permits the heirs to act with the decedent’s wishes in mind and can make certain that assets and possessions are passed to the correct individuals or organizations.

The Delaware County Daily Times’ recent article, “Senior Life: Things people should know about creating wills,” says that estate planning can be complicated. That’s the reason why many people use an experienced attorney to get the job done right. Attorneys who specialize in estate planning will typically discuss the following topics with their clients.

  • Assets: Create a list of known assets and determine which of those are covered by the will and which have to be passed on according to other estate laws, such as through joint tenancy or a beneficiary designation, like life insurance policies or retirement plan proceeds. A will also can dispose of other assets, such as photographs, mementos and jewelry.
  • Guardianship: Parents with minor children should include a clause regarding whom they want to become the guardians for their underage children or dependents. (For more about this, download Mastry Law’s FREE report A Parent’s Guide to Protecting Your Children Through Estate Planning.
  • Pets: Some people use their will to instruct the guardianship of pets and to leave assets for their care. However, remember that pets don’t have the legal capacity to own property, so don’t give money directly to pets in a will.
  • Funeral instructions: Finalizing probate won’t occur until after the funeral, so wishes may go unheeded.
  • Executor: This individual is a trusted person who will carry out the terms of the will. She should be willing to serve and be capable of executing the will.

Those who die without a valid will become intestate. This results in the estate being settled based upon the laws where that person lived. A court-appointed administrator will serve in the capacity to transfer property. This administrator will be bound by the laws of the state and may make decisions that go against the decedent’s wishes.

To avoid this, a will and other estate planning documents are critical. Talk to an estate planning attorney or download a FREE copy of our estate planning book, Failing to Plan is Planning to Fail.

Reference: The Delaware County Daily Times (January 7, 2019) “Senior Life: Things people should know about creating wills”

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