In an earlier post, I explained that assets that are solely in our names, or held as tenants in common and community property, will pass to our beneficiaries through the probate process. Some trusts will also pass via probate, but that is for a different discussion. If you are named as executor/personal representative in a will, or if you have named someone else in your own will, you should understand how probate works.
We need to remember that the probate process varies from state to state. Also, be aware that being named in a will does not make you an executor. Typically, a will is recorded with the clerk of the county court in the place where the decedent lived. A judge will appoint the executor and issue letters of administration or letters testamentary. Often people are unaware that we cannot release a deceased client’s confidential information without the proper authorization of the court. Obviously, if someone is still alive, there are no letters of administration, so going to a financial institution and asking for information based upon being listed as the executor has no force. Yet, we get these requests all of the time.
Being an executor is a serious obligation. You must find the will, submit the correct forms to the court, notify creditors, collect assets, value the estate, manage the assets, pay taxes, debts, and expenses, file tax returns and ultimately distribute the assets. In most cases, you will also need to deal with beneficiaries, many of whom may not like each other. You will also need to pay court filing fees. This process can take several months to several years. If the decedent owns property in more than one state, than an ancillary probate in that/those states will need to be filed, with all of the attendant expenses and delays.
We find that many people do not realize that many assets they own will accidentally pass via probate. In our experience, bank and checking accounts that are kept for nostalgic purposes in states where the client no longer lives are common causes of accidental probate. So too are shares of stock in insurance companies held at transfer agents. Many people own small numbers of shares from stock splits that are also in their sole names and held at a transfer agent. The beneficiary of a life insurance policy or retirement plan may no longer be alive, and a contingent beneficiary had failed to be named. Frequently, the cost of probate is most or all of the value of the asset being probated.
We all need to decide whether the probate process is right for us. Probate does ensure court supervision, which can ease the minds of heirs. Probate also protects creditors and heirs by establishing a specified period during which claims can be made. Those, such as doctors, who are the unfortunate victims of our litigious society may wish to consider the pros and cons of probate. Others, who have little risk from creditors known and unknown, may want to avoid the complexity and costs of probate altogether.
Whatever you decide, you should take proactive action now to avoid complicated and expensive probate later. Consolidate your accounts to only those that are necessary. Close out-of-state accounts that you do not need. Get rid of small amounts of stock held at transfer agents or in certificate form in your safe-deposit box. Review all of your beneficiary designations to make sure that they will not accidentally be paid to your probate estate. Opening formal estates for pin money is a terrible waste of time and money.
We are here to help. Keeping your financial plan up to date is an effective way to root out defects in your estate plan. You are not bothering us when you ask for an update, that is what we are here for. Lastly, we are not attorneys and we do not practice law. Always rely on the advice of a competent and experienced attorney. The material provided is for informational purposes only.