Probate and Trust Administration

David K. Lauritzen, P.C. provides a full range of legal services related to the administration of a decedent’s estate to trust administration. If you are an Administrator, Executor, or a Successor Trustee and need some assistance, contact us.

Probate:

Probate is the legal process by which the property of a deceased person is transferred to others. Formal court supervised probate proceedings may be required to facilitate this transfer, except where the value of the deceased person’s property is under a certain amount or the deceased transferred their property into a trust prior to their death.

The probate process depends on whether the deceased left a will. If there is a will and it names a person to be appointed as executor, then that person, usually with the assistance of an attorney, files a petition with the court to be formally appointed executor and to admit the will for probate. Notice must be given to all persons named in the will, all known creditors of the deceased, and the deceased’s natural heirs. Notice must also be published in a local newspaper.

Unless someone objects to the proposed executor or challenges the will, all of this is relatively routine. The executor’s first job is to gather and safeguard the deceased’s assets so that they will not be distributed to the beneficiaries until at least after the
120 days.

Creditors of the deceased may make claims against the estate within 120 days of the probate notice being published. Due to these potential claims, no money or other assets of the estate can be distributed to the beneficiaries until after the 120 day period has expired.

The executor, with the assistance of an attorney, must then prepare an inventory of all of the deceased’s property belonging to the probate estate, including real estate, bank accounts, stocks and bonds, life insurance, tax deferred accounts, and personal property. Property that passes outside of the probate proceeding through a revocable living trust, joint tenancy, or beneficiary designation does not need to be recorded on the inventory. This inventory is filed with the court.

Depending on the terms of the will, the executor may have to sell property or other assets. The executor must account to the court and the heirs for every penny that comes into and out of the estate. When the time for creditors’ claims has expired and the estate’s assets have been liquidated or are otherwise ready to be distributed, the executor will submit to the court and the heirs a Probate Accounting and Proposed Order for Final Distribution, which will distribute the estate according to the terms of the will.

If all goes smoothly, depending on the type of assets and distributions required in the will and whether there are any disputes, the entire process takes approximately one year. If the estate is very large and a federal estate tax return has to be filed for the deceased, then it can take longer. Probate can easily last five years, especially if there is a conflict between the heirs and the executor. Both the executor and the attorney hired by the executor receive separate fees. The probate of a $200,000 estate generally yields the attorney and the Executor $6,000 to $8,000 each.

If the deceased died leaving no will, then the process is a little different. Someone, usually a close family member, petitions the court to be appointed administrator. An administrator acts just like an executor, but is advised to post a bond to assure his or her performance. The court then oversees the administrator and may choose to limit the administrator’s power to specific, court-approved tasks. For more information on intestate succession, see discussions on Wills and Trusts and Estate Planning.

Trust Administration:

Trusts are marketed as being able to avoid probate—a long, drawn out, expensive process. The problem is that people mistakenly believe that once they have established a trust, everything is in order and their assets will automatically transfer to their heirs with no problem. This is not always true. While trusts are generally easier to administer and successor trustees usually do not have to go to court, Trust Administration can also be very complex, depending on the titles of all of your assets, the value of your estate, and whether your heirs will get along well together.

However, Trust Administration can be easy if the value of your estate is relatively small, you have your assets titled correctly, and your heirs all get along. With original death certificates, successor trustees can close out bank accounts, cash in life insurance policies, pay final expenses and bills, file a final tax return, and split assets according to your wishes. Trust Administration for a small estate often takes six months to a year.

Many Successor Trustees are sophisticated enough to do all this on their own. Most are not. Beneficiaries and natural heirs are entitled to an accounting, just as they are in the probate process. The court does not oversee Successor Trustees, but Successor Trustees are accountable to the beneficiaries for all they do in relation to the deceased’s estate. It is recommended to have an attorney oversee this process.

If an A/B Trust was created by parents or partners to protect their children from estate taxes and one spouse dies, then not only an attorney should be contacted but also an accountant since this process is very complicated and complex. A “Bypass” or “Credit Shelter” Trust is generally created after one spouse dies. This process does take some additional time and investment, but the tax savings far outweigh the investment.