Recently, while discussing an update
to estate plan documents with an existing client, the client stopped me and
asked, "What happens when I pass away?” I started to tell him that the
documents will minimize or eliminate estate tax, avoid probate, and protect his
family. The client stopped me short and said, "I understand all that, but
what really happens?". It was then I realized that, my answer to him had
been completely precise and yet useless. As professionals, we often focus on
the big picture of estate planning, giving little or no explanation as to how clients,
or their loved ones, use the estate planning documents we create. Over the
course of the next few posts we will discuss what should actually occur when a
person dies.
When a client passes away and their
family or other loved ones notify us, we often suggest sitting down with the Personal
Representative, Trustee, and any other parties who want to attend, after the
funeral has occurred. Generally the personal representative and trustee do not
need to take any immediate action and our preference is to let the family
complete its grieving period before meeting with them.
At that meeting one of the first
issues we discuss is whether the decedent owned any assets in their name alone
that will require a probate. If there is an asset that is only in the name of
the decedent, the probate process facilitates the legal transfer of that asset
to the decedent's beneficiaries. The probate process involves a number of steps,
depending upon whether or not the probate is a "small probate" or a
"full probate.” If the value of assets needing to pass through probate is
less than $20,000, a small probate is sufficient to complete the transfer. In a
small probate, the personal representative completes one form, and the process
of filing the estate, obtaining an order for the distribution to the estate
beneficiaries, and closing the estate takes only one day.
A full probate, where the estate
contains assets having a value greater than $20,000, requires a number of
steps:
- The Personal Representative opens a probate file with the Probate Court. This includes a petition to the Court requesting that the personal representative be appointed to administer the Estate
- Notice of the probate must be given to heirs at law as defined by the statute
- An inventory of assets must be filed with the Court
- The Personal Representative must notify known creditors and potential creditors are notified by placing a notice in the local legal news that the decedent has died and the creditors have only 90 days to file a claim against the estate.
- After settling any debts with creditors, the personal representative distributes the estate to the beneficiaries designated in the Will or in the absence of a Will to the heirs at law
- The Personal Representative gives a final accounting to the heirs at law and the court
- A request is made to the court to close the estate when there are no longer any assets owned by the estate.
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