The Biggest Mistakes People Make When Probating an Estate

Losing a loved one is difficult enough without the added stress of having to make important financial decisions while grieving. For many people, the duties and responsibilities of probating a loved one's estate can feel overwhelming. The probate process is time-consuming, complicated, and, quite often, extremely frustrating. If you have been named as an executor or  personal representative and are tasked with settling an estate through probate, you'll want to avoid these common mistakes.

Handling assets incorrectly

One of the first things an executor or personal representative must do is secure all of the decedent's assets. Accomplishing this requires taking different steps for different types of assets. For example, financial accounts may simply need to be closed, whereas real property (such as a house) might require making sure the property is secure and arranging for its maintenance.

Categorizing assets incorrectly

Some assets do not have to go through probate. When you inventory assets, it is important to make sure you categorize them properly. Assets that are not typically subject to probate include:

  • Assets held in trusts
  • Funds held in certain "beneficiary designated" accounts (that is, accounts where beneficiaries have already been designated)
  • Certain forms of property held jointly

Failing to determine "Date of Death" values

Date of Death values refer to the fair market value of each estate asset at the time of the decedent's passing. The sooner this task is undertaken, the easier it will be to determine the correct value. Executors often turn to professional appraisers for assistance with this task.

Handling creditors improperly

Every potential creditor of the estate must be notified about the estate going into probate. If the creditor is known, he or she can be notified personally. Unknown creditors, on the other hand, must also be notified. How? Through a notice published in a local newspaper.
The probate must be kept open for a period of time mandated by state statute to allow creditors to file claims against the decedent's estate.

Failing to communicate effectively with estate beneficiaries

Working closely with beneficiaries is not a legal requirement, but failing to keep them abreast of developments can be a big mistake. In fact, poor communication sometimes leads to unnecessary, and expensive, litigation.

Remember: You are not the only one dealing with the loss of a loved one--so, too, are the decedent's heirs. It is an emotional time for them, and they may feel slighted or ill-treated if you don't stay in touch with them.

Distributing estate assets too soon

As the estate's executor, you have the authority to distribute assets to beneficiaries as well as to approve and pay creditor claims. However, sometimes an estate lacks sufficient assets to honor bequests made in the will and pay every creditor claim. In such a situation, creditors must be prioritized according to the law and assets must be dispersed based on that prioritization. If you, as executor, do not follow the law, you could be held personally liable.

If you have been named as an executor/personal representative and would rather not accept the responsibility, we can handle the probate process for you from start to finish. This will allow you to focus on what is most important... coming to terms with your loss. Remember: You are not alone during this difficult time.

Protecting Inheritances For and From Your Heirs

Our clients often express concern about protecting the inheritances of their children. Sometimes, parents worry about the security of a child's job and what will happen if he or she loses that job, cannot pay bills, and subsequently loses the inheritance to creditors. Other times, parents worry about the influence a child's spouse has over their child's money management decisions. A child embroiled in a "bad marriage" frequently leads to parental concerns over an inheritance being diminished or lost through divorce. Finally, parents often wonder whether their children are mature enough to handle an inheritance on their own.

Fortunately, there are a number of ways for you to leave an inheritance to your children and protect that inheritance against threats such as these and more. Certain types of trusts, for example, have the power to accomplish this goal, with the added benefit of avoiding probate. Here are a few examples.

Discretionary trusts

With these types of trusts, the trustee has complete discretion to determine trust distributions and the beneficiary cannot demand distributions.

The settlor of the trust can provide guidance about distributions and withhold distributions if a child is facing divorce, bankruptcy, and/or personal problems that may impact his or her ability to manage the inheritance wisely. In addition, creditors cannot access trust assets.

Support trusts

In the case of a support trust, the trustee is required to make distributions for health, education, support, or maintenance to the beneficiary if so desired by the beneficiary. Only certain creditors, known as "super creditors," can access the trust assets. Examples include child support/alimony payments, claims for services that "protected, preserved or enhanced the beneficiary's interest," and state/federal government debts such as tax liens.

Spendthrift trusts

These trusts prevent the beneficiary from voluntarily or involuntarily transferring his or interest in the trust and protect trust assets from most creditors, excluding the super creditors described above.

If you are concerned about protecting your children's inheritances against threats posed by creditors, predators, divorce, or even your children's own poor decisions, we can design a plan capable of providing the level of protection ideal for your particular situation.

The Importance of Choosing a Qualified Trustee

A trustee can be one person, multiple people, or what is called a "corporate trustee," such as a bank or trust company staffed by people who manage and grow trust assets. It is essential to choose the right trustee because this person or institution is responsible for carrying out your wishes and protecting trust assets.

Many grantors name a spouse, an adult child, a relative, or a close personal friend as trustee.

The person you choose must have the ability to serve in this capacity and the willingness to devote all of the time and energy necessary to carry out the mandates of the trust. It is important to note that the trustee must administer the trust faithfully and accurately. He or she can be held legally and financially responsible for any mistakes, even those that are unintentional. This is why you should think long and hard about your choice of trustee. Do not take this important decision lightly.