Probate is complex and often misunderstood. At its core, it is a form of litigation to re-title assets after someone passes away. It is a court-driven process and may take place in several courts when real estate is owned in various states. Although most probate is done without dramatic contests or family infighting, sometimes you hear of high-profile cases that give everyone pause. One thing that many people do not realize, the probate process is only for assets that pass through a Will, which are primarily those assets that were titled in a person’s name, individually, before death. Assets that were owned jointly or titled in the name of a trust or assets with a beneficiary designation (such as most insurance policies or retirement accounts) are not subject to probate, which means they can generally be distributed to the named beneficiaries immediately upon death without court approval. Thus, a proper estate plan with a trust that was funded during life will greatly help to reduce the need for probate and a prolonged estate settlement.
The probate process is meant to help collect and inventory the assets of the estate, resolve creditor claims, make sure the wishes of the deceased are honored, and ultimately provide an orderly process for the distribution of assets either per the wishes of the deceased (if there is a Will) or by statute (if there is no Will). When there is no Will, the Commonwealth of Massachusetts has a very specific set of laws to distribute assets. These laws, known as intestacy, can be somewhat more cumbersome and costly to administer, and may result in the distribution of your assets to people you would not expect or want to receive them. Since the Massachusetts Uniform Probate Code is relatively new law, it is imperative for everyone to have their current estate plans reviewed so that your assets do not end up with unintended beneficiaries.
Personal Representatives (formerly referred to as Executors) play an important role in the probate process. The firm works directly with the Personal Representative, who provides direction for administration of the estate. The named Personal Representative is the person who is legally responsible for gathering all of the deceased person’s assets, making sure that all debts are paid from those assets and then distributing the remaining assets in accordance with the terms of the Will. There is liability associated with being a Personal Representative depending on the type of probate. If you are named as a Personal Representative, you should be sure to discuss that liability with your attorney and understand it fully before proceeding.
The Personal Representative, or Executor, should be aware that the Probate process is NOT a tax process. At death, all assets transferred to heirs, including those not subject to probate, could still be subject to an estate tax at the federal and state level. When an estate tax is payable, it becomes due within nine months of the date of death. The amounts subject to these taxes do change, so you should consult an attorney for the most current information. Sometimes, depending on the size of the gross estate, an estate tax return may need to be filed even when no estate tax is due in order to release the state’s automatic lien on real estate. It is therefore advisable that the Personal Representative consult with attorneys who are knowledgeable in this area, as soon as possible after death, even when there is no Will to probate, to make sure that all estate tax forms that may need to be filed are done so in a timely manner.
Whenever we are asked by survivors to help settle the affairs of a loved one, we work hard to do it as efficiently and cost effectively as possible. If you are out of state, we can accomplish much of the communication required through email, phone conference calls, and the U.S. mail. To help keep costs down, the bulk of the work will be done by the paralegal staff, although of course, an attorney will work closely with that staff and supervise their work. Apart from cost minimization, our goal at Squillace & Associates, P.C. is to make the probate process as gentle as possible during a time of grieving.
Trust Administration (sometimes referred to as Trust Settlement) is different from the probate process. A trust is a legal contract between the maker (or grantor) of the trust and the beneficiaries. Trustees have the responsibility to make sure the trust is implemented correctly. The process of implementing the trust — making payments to beneficiaries and filing necessary accountings and tax returns — is what is known as Trust Administration or Trust Settlement. This process usually ensures that the beneficiaries will receive the assets as outlined in the trust. Sometimes this means a one-time, lump sum payment; sometimes payment is over time. Sometimes payment may be of the income only. It all depends on what the trust document says. Trustees or family members should be sure to consult with an attorney to understand their obligations.
When someone passes away with assets in their name alone, many times a Pour Over Will can serve to place (or literally ‘pour over’) those assets into a trust (sometimes referred to as a ‘Stand-by Trust’). This “pouring-over” happens through the probate process. After the assets are put into the trust this way, they are then held in the trust and used for the beneficiaries, or distributed directly to them, as directed by the trust. The trustee is often directed to divide the trust into separate shares for tax purposes. Again, an attorney should be consulted to ensure that tax and other laws are complied with during this process, that the proper assets are distributed into each sub-trust and that the assets are divided up in as tax-efficient way as possible.
If named as a Trustee, you will want to make sure you review and fully understand your responsibilities under the trust, as well as your potential liability. A trustee will be subject to liability if assets are not distributed correctly. We therefore recommend that trust documents always be reviewed by an attorney. Some trusts are settled and closed quickly while others will be ongoing (it all depends on the terms of the trust document). Typically, the trust will need to file a tax return annually, if it is earning money, so it is also important to consult with an accountant regarding potential income tax liability.
Our fees to assist with trust settlement are usually calculated on an hourly basis unless you have done your estate planning with our firm. When you have done your estate planning with our firm and kept your plan updated (and your trust fully funded during lifetime) we offer a fee cap for settlement services. We try to have as much of the work as we can do at the paralegal level to avoid the higher rates of the lawyer. Of course, all of the work performed by a paralegal is supervised and reviewed regularly by an attorney.