Mary Owens: Understanding your will, probate process
For the next several months, I will discuss some of the most fundamental issues concerning your estate. Proper estate planning, prepared with considerable forethought, is a true act of love for the benefit of your loved ones. At your passing, your grieving family members need a minimum of two items of clarity for their future: one is that the disposition of your estate will be carried out as you intended, and the other is that this will occur with the least amount of administrative hassle and delay.
We will begin with the most frequently asked questions concerning basic estate planning concepts.
‘I have a will; is that enough? Can I avoid probate with just a will?’
Let’s start by first discussing what a will is and who is responsible for carrying out its written directives.
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Your will is a written set of instructions to a probate judge. It is a legal document telling a probate judge what you want done with your assets and who is the person (your executor) who will carry out those instructions. Based upon a wide variety of circumstances, mostly dealing with the complexities of your estate, the judge will allow the executor to fulfill his/her duties with a small amount of court supervision or may require significant levels of court supervision. However, there are many mandatory steps to probate that must be followed and accomplished by the appointed executor. We will leave that discussion for another day. The probate process is complex, time consuming, costly, and cannot be addressed adequately within this discussion. But one of the most important concepts of probate should not be forgotten. It is a public process; anyone can attend these hearings, view the inventory of your estate, and determine the value of your probate estate. If you wish to keep your estate affairs private, the public process of probate should be avoided.
The amount of supervision a judge will exercise over the administration of a will is determined by the probate court after reviewing several documents that need to be filed with the court system. First, the judge will review the appointment of the person named as the executor in the will. In most probate cases, the judge will accept the named executor you designated. However, the judge may appoint a different executor than the one you chose if convincing evidence is presented to the probate court that indicates the desired executor is not an appropriate person to serve as such. After hearing from other interested parties, if there are any, the judge will consider the circumstances of your estate and determine the amount of court supervision the executor will be required to follow. If your will is being contested or has contradictory provisions, or if your estate is involved in a lawsuit, owns complex assets, has significant cash flow issues or other unusual circumstances, the judge may increase the level of supervision required during the estate administration period.
Many states have a process that allow very small estates to avoid a full probate process. A “Small Estate Affidavit” can be filed with the local probate court requesting probate be waived. This procedure varies by state. The avoidance of probate has its pitfalls if it is later determined that the decedent had outstanding bills or other legal challenges of which the executor was not aware and distributed all the assets to heirs without proper legal notice to creditors and other potentially interested parties. This method of avoiding probate should only be used after the executor has received adequate legal advice on the suitability of its application. The executor can be personally liable for unpaid claims if the process is not performed with the proper protections in place for the person administrating the estate.
It is very important to understand what is and what is not a probate asset. A thorough understanding of titling and the nature of the asset is essential to understanding how the disposition of your assets will be carried out.
Some types of asset classes require that a written declaration of the intended beneficiary be provided by the owner. These types most commonly include retirement accounts such as IRA’s, annuities, transfer on death accounts, and pension benefits. If an asset already has a beneficiary designated, the assets will not go through probate, and will pass directly to the named beneficiaries. Assets held in joint tenancy will also pass to the joint tenant without the necessity of probate. However, the executor may ask the court to assist them in gaining control over these assets outside of your probate estate assets. It is a rare occurrence, but it can and does occur. An executor may require these assets be included under the court’s probate control if the existing probate assets of the estate are insufficient to pay all the outstanding bills of the decedent. These bills could be related to estate taxes, a lawsuit, medical bills and similar items. Proper estate planning would account for these issues and seek to avoid them. Reaching of assets held outside of probate by an executor is an involved and often contentious action that does not add value to any estate administration procedure. Avoiding this process is essential in any will drafting with adequate forethought.
The main question of “I have a will; is that enough?” will be addressed in the next several months. The answer to that question involves a greater understanding of the operations of a revocable trust and the nature of your estate. Your desires for privacy will also be addressed.
In the meantime, get out your estate planning documents and start reading them. If they are out of date, take control while you are able, and get them revised. If you do not understand them, seek out your estate planners for clarification. The first step in being prepared is education.
Mary Owens, Principal/Branch Manager, RJFS, 426 Sutton Way, Suite 110, Grass Valley, 530-272-7500. Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC. Owens Estate and Wealth Strategies Group is not a registered broker/dealer and is independent of Raymond James Financial Services.
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