Last week I summarized what the process of probate is and when it is required here in Alabama.
This week I wanted to delve a little deeper into the process and discuss duties and a timeline of events.
I will divide this into two parts:
- One, IF THERE IS A WILL(today’s installment), and
- Two, IF THERE IS NO WILL (the next installment).
When a person dies with a valid Will (or what looks like a valid will).
While there is no urgency to get “probate” started since the law gives you five years after death to have the Will recognized, the reality is that many families need their inheritance and when real estate is involved, taxes and insurance need to be paid. So getting the probate process moving along is important.
The attorney would meet with the person nominated to serve as the Executor and review the Will and family dynamics and hopefully, be able to quote a fee at that time. Some attorneys use an hourly rate to do this work, while others quote a flat fee. Either way you are probably looking at spending several thousand dollars before it is concluded. Avoiding probate entirely begins to look better and better, but those plans are water under the bridge at this point, at least for this person.
The person nominated to serve as Executor has no authority or power at this point. He or she only becomes the Executor once the Probate Judge appoints them to the position. This is an important distinction because many people assume they have authority to start selling things, giving things away, cashing out bank accounts and so forth, long before probate has begun.
When your lawyer is hired, he/she will prepare two petitions needed to open the estate and may also prepare Waivers of Notice for all next-of-kin to sign and return. Notice that the next-of-kin sign these, not the people named as beneficiaries of the Will. These waivers and these petitions will be taken to Court, along with the original Will and death certificate, and a case will be opened. The Court will issue Letters Testamentary to the lawyer who then gives them to the person who has been appointed to serve as Executor. These Letters grant the Executor full legal authority to act on behalf of the estate. He or she can do whatever the Will says they can do, including open and close bank accounts, liquidate CDs and investments, open and close safe deposit boxes and sell real property (if the Will says so). The executor’s job is to safeguard the assets of the estate for the benefit of all the beneficiaries, but they are under no immediate time demands to make distributions. It is wise to wait until six months has passed before making any distributions, because all creditors of the deceased can file claims up to six months out for money owed. If there is not enough money in the estate to pay off creditors, the Executor is personally liable if he or she has already made distributions.
The first thing to do is have the attorney obtain a new EIN for the estate from the IRS. This EIN letter and the Letters Testamentary can be used to open a new bank account in the name of the estate. This is where all funds coming into the estate will be held pending future distributions.
Hiring a CPA to help with the final tax return is also a good idea at this point.
If there is a home or any other structure owned by the estate make sure you confirm that it is fully insured! Make any necessary changes to the insurance to keep it insured because if you let insurance lapse and the house is destroyed, the beneficiaries will expect you to make good on their loss.
If there is stock or investments in the estate, you might want to simply have it all sold and put the money in the new bank account. If the market takes a nose-dive and you have simply been sitting on the investments, the beneficiaries may say you did not exercise fiduciary responsibilities by letting their inheritance go down and they could hold you liable for their loss.
At the end of six months, we would review the file to see if there are any creditor’s claims of record. If there are, you, as executor, could simply pay them or you could challenge them. It is very easy for a creditor to file a claim, and many claims have little or no support other than someone’s signature notarized on a form, so unless you are certain the claim is valid, we suggest challenging it to make them prove their claim. They rarely bother attending the hearing, so it is fairly easy to win when a claim is challenged.
After all claims have been dealt with, now it is time to start following the Will by making distributions.
Some wills are easy to follow and some are unreasonably difficult to follow. It is your job as Executor to follow instructions though, so now we contact each beneficiary and let them know what they have coming to them, either in terms of money or property.
It will be necessary when the estate is ultimately closed for you to present to the Judge a document known as a “Consent to Settlement” signed by every beneficiary under the Will. I strongly advise getting that consent signed before you distribute anything to anyone. It can be very difficult finding people after the fact.
Once you have made distributions and dealt with the final tax return, there is nothing left to do, so we ask the Court to release you from further responsibilities. We file a Petition for Consent Settlement and the Judge will sign it and you are now free.
If one or more beneficiaries refuse to sign the Consents, or if someone is contesting their share, we may need to schedule a hearing before the Judge by filing a Petition for Final Settlement. This is more expensive and time-consuming than a Consent settlement and should be avoided if possible.
All things considered, the process has cost several thousand dollars and has taken close to a year of your time.
There is more to the process than this; I have summarized the process and minimized some of the details the attorney will be working on in the background, but in general this is a sample of how a straightforward probate might take shape. We handle a good bit of probate so if you need help in this process, please give us.
©2018 Nolan Elder Law, LLC
William G. Nolan
Nolan Elder Law & Estate Planning, LLC
1232 Blue Ridge Blvd.
Hoover, AL 35226