Probate and Trust Administration

Probate is designed to create a “final accounting” upon death. It is the legal process of “proving up” a Will, or verifying that a Will is valid, and takes place in one of two instances. First, if a person dies leaving behind a Will, or second, if the deceased has died intestate, that is, has not left behind a Will or estate plan of any type or the Will cannot be found.

Depending on the complexity of the estate and the thoroughness with which accounting has been carried out before death, probate can either be a relatively simple task or a daunting one. Be aware that no matter the situation, probate may be a lengthy process often taking months or possibly years to play out, and one which may take a considerable amount of time.

To summarize the process, probate can be broken into six basic steps:

• Validation of the Will
• Appointment of personal representative (executor)
• Inventory of the estate
• Payment of estate taxes
• Payment of claims against the estate
• Distribution of remaining assets

Each of these steps involve legal documentation and validation, and more importantly, proper accounting each step of the way.

Probate begins and ends with the special Probate Court set up in each state to handle estate issues. (Sometimes known as the Surrogate, Orphans’ or Chancery Court in certain states.) All actions taken regarding the estate are accountable to this court, and must be noted and reported regularly. This court is staffed by judges qualified to oversee estate resolution issues.

To summarize the process, trust administration can be broken into five basic steps:

1. Inventory of assets
2. Determination of estate tax
3. Division of trust assets
4. Filing of federal and state tax forms
5. Distributions to the beneficiaries

Although the trust administration process seems relatively straightforward, there are several reasons it can sometimes be drawn out over several months or even years. The first step, the inventory of assets, must be completed before the trust administration can begin, and this can be difficult to complete depending upon the prior organization and the size and complexity of the decedent’s assets. Next, the 706 estate tax return must be filed within 9 months, or 15 months if an extension is filed. Often, it is prudent to wait until the last minute to file this form. If the spouse of the decedent is in failing health and may pass away before the deadline, then both 706 forms can be used to maximize tax advantages to the estate. The final step, asset distribution, cannot take place until the 706 has been filed, and even then should not take place until the “Closing Letter” is received from the IRS certifying acceptance of the 706 return. This closing letter will take a minimum of 6 to 8 months, and as long as 3 years, to arrive after the 706 is filed. In addition, there may be a state estate or inheritance tax returns required, even if a federal return is not required.

While having a Living Trust can significantly reduce costs compared to probate, there is still a considerable amount of work to be done in properly administering even a simple Living Trust. The services of an attorney are usually needed, and that person or firm should be compensated fairly for their services. It is important to remember that the fees allowed for trust administration are usually much lower than those for probate, and there is generally less work involved, as there is less involvement of the courts and state bureaucracy.

In some instances, not all assets were transferred to the Living Trust before the decedent’s death. In this case, you may need to go through the probate process to validate the pour-over will and allow you to transfer the assets to the trust. In this case, fees and costs associated with the probate process will need to be paid.

The answer depends upon the language of the trust document. Certain trusts include “pick and choose” language that allows trustees to selectively place assets into the “B” trust.

Like most assets, how you transfer title to vehicles depends on how the vehicles were titled before the decedent died. If you owned the vehicles as joint tenants with the decedent, then in most states you can simply take a copy of the death certificate to the state Motor Vehicle Department (MVD) and perform the transfer, paying whatever fees are required by MVD. If the vehicles were titled in the name of a trust, the vehicles are administered by the Trustee of the trust, as are the other assets. If the vehicles were in the decedent’s name alone, you may be required to go through the probate process if a non-probate affidavit cannot be used.

Social Security will continue to send out benefit checks until they are notified of an individual’s death. The personal representative/spouse/trustee should contact the local Social Security Administration office and notify them of the death, or if a benefit check is received, send it back with a letter notifying them. This is important. If checks continue to be deposited, the recipient can incur liability later when Social Security learns of the recipient’s death.