“Dad’s (or Mom’s) will says I am the sole beneficiary. I took the will to the bank, but the bank refused to give me my money. Why won’t the bank give me my money, when Dad’s (or Mom’s) will says I am entitled to it?”
What many people do not realize is your will by itself does not give anyone the authority to transfer assets upon your death. A will is nothing more than a set of instructions to your agent who gives what you have to whom you want. Your agent is called a personal representative. Your agent used to be called an executor or administrator.
Your personal representative’s duty is to preserve and protect the assets of your estate, pay all creditors and estate expenses and then distribute the remainder in accordance with the instructions in your will. However, before your personal representative can make any distributions in accordance with your will, he or she must be appointed personal representative by the probate court through the probate process.
The probate process has been streamlined over the years and is nowhere near as burdensome as it once was. However probate can still take the better part of a year and result in considerable legal fees. That’s good news for lawyers.
If you are named as personal representative in a will, I generally recommend you begin to preserve and protect estate assets even before you are appointed by the probate court. For example, the locks on the house should be changed immediately after death, even before the funeral. You do not know how many keys were given out by the deceased during his or her lifetime or what people were told they were getting after the death. It is not uncommon for personal property and valuables to either be removed from the house by persons who believe they were entitled to that property or just “disappear”. Often times, property is removed during the funeral, when the family is away.
To start the probate process your personal representative files your will with the probate court along with your death certificate and a number of other completed court forms. The court then, with or without a hearing, appoints your personal representative and issues letters of authority. These letters of authority give notice to all the world that your personal representative now has the legal authority to manage your property.
One thing that many people do not realize about probate court is that the court files are generally considered public records. If you had a neighbor pass away and you wanted to know what they owned and who was going to get what, you could go down to the probate court and review the probate court file.
Once appointed by the probate court, your personal representative has to notify all known creditors and publish a notice to creditors in the newspaper for all unknown creditors. The first creditor is the probate court. There is a filing fee for commencing the probate proceeding. After your personal representative files a list of all your assets with values, an inventory fee based upon these values is due to the court. There are usually funeral and medical bills to be paid and the attorneys’ fees, of course.
I call this after-death probate process the lawsuit that your family files against itself to protect your creditors. Your creditors generally have four months from the date of publication or notice to make a claim against your estate. After all your creditors and estate expenses are paid, then your personal representative can distribute the remainder of your assets in accordance with the instructions that you leave in your will.
After everything has been distributed, your personal representative can then file to close your estate. Your personal representative cannot file to close the estate any earlier than five months after the appointment of your personal representative or four months after the date of publication of the creditors notice, whichever is later. Once your personal representative files to close the estate, it usually takes another thirty to sixty days before the estate is officially closed.
There are a variety of tools that you can use to avoid the probate process. One of the most effective tools to avoid probate is a trust based estate plan in which all your assets are titled or “funded” to the trust. Although a trust based estate plan is initially more costly to set up than a will based estate plan, the administration of a trust based estate plan is usually much less than the administration of a will through the probate process. As was said in the old Fram oil filter commercial, “You can pay me now, or you can pay me a lot more later.”
Other tools that many people use in an attempt to avoid probate are beneficiary designations or joint ownership. These may sometimes work. Beneficiary designations must be coordinated with your other estate planning documents. Beneficiary designations may not work as intended if your beneficiary becomes incapacitated, gets sued or dies before you. Joint ownership offers little protection for you or your assets if your joint owner becomes incapacitated, gets greedy, gets sued, gets mad at you or dies before you.
By: Matthew M. Wallace, CPA JD
Published edited January 25, 2009 in The Times Herald newspaper, Port Huron, Michigan as: How to avoid problems with probate, property