The Essential Executor's Handbook: A Quick and Handy Resource for Dealing With Wills, Trusts, Benefits, and Probate (2016)
Under the very best of circumstances, settling a decedent’s estates can be complex and time-consuming. However, there is a common assortment of fact patterns that can make your job even harder. Let’s look at the ones most frequently encountered.
It may be that your decedent signed a will but it cannot be located. Even if you know the contents of the will, you have to proceed according to the rules of intestacy rather than what you know to have been the decedent’s wishes.
For example, let us say that your decedent was the single father of three grown children. You know for a fact that he disinherited the youngest of them in his will. That will cannot be found. In the absence of the will, the law is going to leave the Probate Estate to all three children equally. To make matters worse, you know that the will named you as executor and waived the bonding requirement. Assuming the court permits you to probate the estate as administrator, you will have to pay the bonding fee out of your own pocket and bonds can cost hundreds of dollars per year and are required until the estate is settled and the probate assets are distributed.
The only solution available here is for the youngest to acknowledge that he was disinherited and sign a document known as a disclaimer. By signing a disclaimer, he is treated as having predeceased his father. Provided he has no children of his own, his share passes to his siblings and the desired result is achieved. If he has children of his own, a lot more disclaimers are going to have to be signed, enough so that the siblings are the only heirs he has left. As for your bonding fee, the court usually has the discretion to waive it but there is no guarantee.
It is fairly common for elderly parents to put all of their trust in one child—the child who is the caregiver and, more often than not, actually lives with the parent. At that child’s behest, or simply in an attempt to avoid probate, the parent makes the child a joint owner of all of the bank and investment accounts. It doesn’t matter that the parent’s will leaves everything to all of the children equally. When the parent dies, all of the bank and investment accounts belong to the caregiver child. That is because the accounts are part of the Contract Estate and not the Probate Estate.
The only practical way for an equal division to be achieved is if the caregiver child is willing to share. Surprisingly, this happens more than you might think—either because of love for the siblings or simply out of a desire to do what is right. On the other hand, the only way to compel the child to share is by proving that the joint ownership was obtained fraudulently or through the abuse of the parent. In either case, it is going to be an uphill battle.
The laws across America are pretty consistent when it comes to which court has jurisdiction to probate the will. By far and away, the majority rule is that it is the Probate Court for the city or county of residence. In other words, if the decedent was a resident of Difficult County when he died, that is the Probate Court that has jurisdiction.
However, what if your decedent had two homes? It is not uncommon for seniors to spend summers in one state and winters in another. In such cases, the city or county where they spent the majority of months has jurisdiction. But it is also common for seniors to live part of the year with one adult child and then part of the year with another child and then part of the year with yet another child—all on a rotating basis with no actual home of their own. In that case, you would have to seek jurisdiction in the county where the decedent had lived the most days out of the past 365. Even then, the court is rarely required to accept jurisdiction.
Bequests to Animals
Either because they read it in the paper, see it on the news, or just hear a story about a friend of a friend who left millions to a cat, most people have an unshakable belief that you can leave money to your pet. Can you? The answer is a very lawyerly, “Yes and No.” Strictly speaking, pets are every bit as much property as the dining room table and chairs. In fact, they come under the Knick-Knack Estate as tangible personal property. And, unless it is not incredibly obvious to you already, rest assured that the law does not permit us to leave property to other property. Accordingly, if your decedent’s will leaves $50,000 to Fido, you have a problem. That is the “No” part.
The “Yes” part of my answer refers to the use of trusts. While you cannot leave money directly to your pet, you can establish a trust for the care of that pet. If your decedent had done that, the bequest in the will might read something like this, “I leave $50,000 cash to the Snowball Care Trust.” If your decedent did not establish a trust but did, in fact, attempt to leave money directly to the pet, you may be able to convince the court that a “constructive trust” has been created and that you are willing to act as trustee. If that attempt is unsuccessful, you may be able to convince the beneficiaries, by written Beneficiary’s Agreement, that whoever volunteers to take the pet gets the money. If that solution proves unworkable, then the bequest will fail and the cash will pass to other beneficiaries named in the will.
Bequests to Minors
Although not pets, minor children share the pet’s legal inability to give receipt for an inheritance. That is because, like pets, they have no legal right to own anything. But if your decedent’s will leaves money to a minor child, the bequest doesn’t simply fail and it must be carried out. There are several possible scenarios that may present themselves.
First, if the minor is the decedent’s child, the will may name a guardian of the child’s property or the will may actually establish a trust for the minor, regardless of whether the minor is the decedent’s child. Either way, someone is named to hold the minor’s inheritance until a more suitable age is attained.
In the absence of a guardian or trustee, your only alternative is to petition the court to appoint a fiduciary known as a guardian ad litem. The guardian ad litem stands in the place of the minor, not just to receive and manage the minor’s inheritance, but to give receipt for it, thereby allowing the executor to complete the probate process.
An executor or trustee frequently finds that the decedent’s real estate is occupied by someone other than an owner. Usually, this is a relative, friend, or even a romantic companion. In some cases, you will find that the will or trust has bequeathed the real estate to the tenant. But if it does not, you may have no choice but to remove the occupant.
On the other hand, several possible solutions present themselves. First and foremost, the beneficiaries who will be taking title to the real estate may agree to rent the property to the occupant. If the occupant is one of those beneficiaries, the other beneficiaries may agree to give the occupant title to the property as part or all of the inheritance. Or, if the real estate is worth more than the occupant’s share, the beneficiaries may allow the occupant to buy them out. The number of possible solutions are endless. The problems arise when the occupant feels entitled to live there, rent-free.
In my experience, whenever the occupant is insisting they be allowed to stay, it’s usually because they have nowhere else to go—usually because they are living on little income or government assistance. If that is the case, and no other solutions present themselves, then you have a fiduciary obligation to remove them. How difficult that will be is going to depend on where you are; it is not going to be pleasant in any case.
As an executor or trustee, there is nothing more unpleasant than dealing with feuding siblings. In most cases, the problem begins with one sibling who has been nursing some perceived slight or insult for decades. No matter how responsible and impartial you endeavor to be, that sibling will assume that you are siding with the enemy, that you are not to be trusted, and on occasion, will actually seek your removal. In one case, a sister was convinced that her parents were worth approximately 100 times what they were actually worth and that the Executor was helping the siblings hide 99% of the money.
Sometimes, there simply is no solution for this problem. Wild eyed, angry, emotional people do not negotiate. They will do all that they can to make your already difficult job even more difficult. In such cases, if you are the Executor, you may have no choice but to petition the court to allow your resignation. If you are the Trustee, you may simply resign.
As I said in the Introduction, people will read this book for any number of reasons. If you are a professional and you are adding settling decedent’s estates to the list of services you provide, I hope that I have given you some idea of the challenges that await you in a new profession. It is a strange calling in some ways, but a rewarding one to be sure.
But if you are the executor for a loved one’s estate, your job is doubly difficult. Not only must you undertake one of the most technically difficult tasks ever to burden you, you must do it all while grieving for your loss. In May 2010, both of my parents died—11 days apart. Despite my years of training and experience, settling their estates was far and away the hardest thing I had ever done. But I got through it and so will you. As a law professor once said to me on the eve of final exams, “This too shall pass.”
ACCOUNT–A report to the Probate Court listing all of the Probate Estate’s receipts, disbursements to creditors, distributions to beneficiaries, gains, losses, and adjustments
ACCOUNTING–The act of providing an account
ADMINISTRATOR–A person appointed by the Probate Court to settle the Probate Estate when there is no will or where the will does not name an executor
ANCESTOR–Anyone from whom you can trace your lineal descent (e.g., parent, grandparent, great grandparent)
APPRAISED VALUE–The value of real estate or tangible personal property as determined by a trained individual who may—but need not be—licensed for that purpose
ASSESSMENT–The value of real estate as determined by local government for the purpose of calculating and collecting real estate tax
AUCTION–A sale of tangible personal property
BENEFICIARIES’ AGREEMENT–A contract between and among beneficiaries whereby the composition and timing of distribution of each beneficiary’s share is determined
BENEFICIARY–Anyone who is entitled to money, real estate, or tangible personal property by virtue of the terms of a will, contract, or living trust
BROKER–A professional who buys and sells securities for investors
BROKERAGE–A company that employees multiple brokers
BUREAUCRAT–A government employee tasked with providing services to citizens (i.e., public bureaucrat) or a customer service representative for a large company (i.e., private bureaucrat)
BUY-SELL AGREEMENT–A contract between a business owner and someone who seeks to buy the business upon the owner’s death
CODICIL–An amendment to a will
COMMISSION–Compensation paid to an executor or trustee
CONTRACT ESTATE–Assets whose distribution is governed by a contract previously made between the person now deceased and a financial institution (e.g., life insurance, joint bank accounts, and retirement accounts)
DEATH CERTIFICATE–A state-issued, one-page document certifying the death of an individual and containing, among other things, information such as the decedent’s name, date of birth, date of death, place of death, usual place of residence, and Social Security number
DESCENDANT–Anyone who can trace you as an ancestor
DNI (Distributable Net Income)–Income of a Probate Estate or a Trust Estate that yields an income tax deduction for either estate when distributed to a beneficiary
ESTATE–Property of every type that previously belonged to the decedent
EXECUTOR–Anyone named in a will and appointed by the Probate Court to settle the Probate Estate
EXECUTOR CERTIFICATE–A one-page document, issued by the Probate Court, certifying that the person named therein is the court-appointed executor
FACE AMOUNT–A cash sum payable to the beneficiary of a life insurance contract upon the death of the insured
FAIR MARKET VALUE–The price a willing buyer will pay a willing seller for any asset of the estate or trust in an arms-length transaction
FDIC (Federal Deposit Insurance Corporation)–An independent agency of the federal government charged with insuring bank customer deposits against loss
FEDERAL ESTATE TAX–A tax on a decedent’s combined assets known as Federal Taxable Estate
FEDERAL IDENTIFICATION NUMBER–(aka Employer Identification Number, or EIN) A nine-digit number used to identify a Probate Estate or a Trust Estate
FIDUCIARY–Generic term for an executor, administrator, or trustee
FIDUCIARY DUTY–A fiduciary’s obligation to exercise the care of a reasonable person in the management or settlement of a Probate Estate or a Trust Estate
FIDUCIARY INCOME TAX RETURN–The annual income tax return (both federal and state) of a Probate Estate or a Trust Estate
FORM 1099–An annual federal information form providing the details of assorted types of income that have been paid to the recipient (e.g., interest, dividends)
FUNDING–The process of transferring assets of every type to a living trust
HEIR–The person who is entitled to the decedent’s Probate Estate when there is no will (aka heir-at-law)
HEIRLOOMS–A colloquial reference to those items of tangible personal property cherished by beneficiaries of the Probate Estate
INTANGIBLE PERSONAL PROPERTY–Paper assets that represents tangible value elsewhere (e.g., cash, stocks, bonds)
KNICK-KNACK ESTATE–The decedent’s tangible personal property, which includes those items of monetary value, sentimental value, and no value
LIEN HOLDER–Anyone who has a legal claim on real estate or personal property as the result of an agreement (e.g., mortgage) or court proceeding (e.g., mechanic’s lien)
LIVING TRUST–An arrangement between the individual who is establishing it and providing the assets (settlor) and the individual managing the trust assets (trustee) for the benefit of others (beneficiaries)
MINOR–A natural person who is not yet old enough to be considered an adult under the law; usually younger than 18 years of age
MINORS CLAUSE–A clause in a will or trust that restricts the use of a minor’s inheritance until a specified age
NATURAL PERSON–A human being
PENSION–A stream of income provided to a retired person—and sometimes a spouse—by a former employer or a government
PLEDGED SECURITY–Real or personal property provided as collateral on a loan
PROBATE–A court proceeding whereby an executor is given access to a decedent’s assets, which cannot be accessed in any other way
PROBATE ASSET–Any asset that the decedent owned in his or her name alone; not in trust, not in joint name, and not having a named beneficiary
PROBATE COURT–The court responsible for the appointment and oversight of executors and administrators
PROBATE ESTATE–All of the probate assets
QUALIFICATION–The court proceeding whereby an applicant provides all the information and documentation the court requires to appoint the applicant executor
RETIREMENT ACCOUNT–(aka Qualified Retirement Account) The product of federal statute as well as IRS and Department of Labor regulations, it is a trust account that accepts deductible contributions that grow tax-free until the owner withdrawals it or reaches the age of 70 ½ years (e.g., IRA, 401K, TSP)
SECURITIES–Stocks and bonds
SETTLOR–The person who establishes a trust
STATE BAR REFERRAL SERVICE–A lawyer referral service made available to the general public by the state’s bar association
STATE ESTATE TAX–A state tax on the decedent’s combined assets
STATE INHERITANCE TAX–A state tax imposed on the recipients of the decedent’s combined assets
SURETY–A form of insurance whereby the beneficiaries of a Probate Estate are protected from theft of malfeasance by the executor or the administrator
TANGIBLE PERSONAL PROPERTY–Assets other than real estate that have or once had intrinsic value (e.g., jewelry, furniture, coins)
TITLE COMPANY–A company that ensures that a buyer is acquiring good title to real estate through title search, document review, and title insurance
TRANSFER TAXES–Taxes imposed on the transfer of wealth from the deceased to the living and include Estate Taxes and Inheritance Taxes
TRUST ASSET–Any asset owned in name of the Trust Estate
TRUSTEE–A person who manages the Trust Estate
TRUST ESTATE–All of a decedent’s Trust Assets
UNLIMITED CHARITABLE DEDUCTION–A Federal Estate Tax deduction for any bequest to a qualified charity
UNLIMITED MARITAL DEDUCITON–A Federal Estate Tax deduction for any bequest to one’s spouse
WILL–A legal document that directs the distribution of the Probate Estate, nominates an executor, and sets forth the executor’s powers and privileges