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 died intestate, that is, has not left behind a Will 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 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 it may consume a considerable amount of your time. 

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

• Validation of the Will
• Appointment of the personal representative (executor) 
• Inventory (and, where appropriate, liquidation) of the estate 
• Filing of federal and state tax forms 
• Determination and payment of estate taxes 
• Payment of claims against the estate 
• Division and distribution of remaining assets 

Each of these steps involves legal documentation and validation, and more importantly, proper accounting at every step. 

Probate begins and ends with the special Probate Court set up in each state to handle estate issues. (It is sometimes known as the Surrogate, Orphans’, or Chancery Court in certain states.) The personal representative is accountable to this court for all actions taken regarding the estate, and the personal representative must keep a record and report regularly. This court is staffed by judges qualified to oversee estate resolution issues. 

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

• Inventory (and, where appropriate, liquidation) of assets 
• Filing of federal and state tax forms
• Determination and payment of estate taxes 
• Division and distribution of trust assets to the beneficiaries 

Although the trust administration process seems relatively straightforward, there are many 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 estate tax return must be filed with the IRS within 9 months of the decedent’s death, 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 estate tax returns for both spouses can be used to maximize tax advantages to the trust. The final step, asset distribution, cannot take place until the estate tax return has been filed, and even then, should not take place until the IRS has certified acceptance of the return. This certification may take as long as 3 years to arrive after the return 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 administrative costs compared to probate, there is still a considerable amount of work to be done in properly administering even a simple Living Trust. An attorney's services 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. 

Like most assets, how you transfer title to vehicles depends on how the cars 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 cars are administered by the Trustee of the trust, as are the other assets. If the cars 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. Although the funeral home usually notifies Social Security of a death, the personal representative/spouse/trustee should contact the local Social Security Administration office and notify them of the death. This is important. If funds continue to be deposited into the account of a decedent, the recipient of the funds will likely incur liability later when Social Security learns of the recipient’s death.