Want to Avoid Probate? Here Are 6 Ways to Do It

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Want to Avoid Probate? Here Are 6 Ways to Do It

Life is busy. If you’re like most people, you have a long list of things to do. However, it’s critical to make time regularly to consider whether you’ve set up your estate in a way that will result in your wishes being eventually fulfilled.

You may have heard people say you should “avoid probate” in your estate and wondered: What does that mean? How can I go about accomplishing it? This article will discuss some of the issues and show you six ways you may be able to avoid probate.

Probate is when the executor named in the will petitions the court to accept the will as valid. In the probate proceeding, the executor collects the assets of the deceased, pays the debts, pays estate or income taxes if owed, pays administrative expenses such as funeral bills and attorneys fees, and distributes the remaining assets among the beneficiaries named in the will.

The whole process is a matter of public record. The will is public as well as the accounting of what the executor does if filed. The process can take up to two years or more depending on the complexity of the estate. The more complicated, the more expensive and time consuming. Further, if the will is contested or the accounting is contested, there could be expensive litigation.

Some people want to avoid probate for two reasons:

They want the distribution of their assets to be as private as possible; and
They want to lessen the time and cost of distributing their assets.

Ways to Avoid Probate

There are various estate planning tools that you can use to avoid the probate process. You may not be able to completely avoid the process, but you may be able to limit the amount of assets that are necessary to go through probate. How? By having “non probate” assets in your estate or by removing assets from your estate while you are alive.

Here is a list of six ways to accomplish these goals:

1. Form a living trust.

Living trusts allow you to avoid probate by listing the trustee as the owner of the assets. With a revocable living trust, you remain in control of the assets, but upon death instead of the assets going through probate, your successor trustee can distribute them pursuant to your wishes set forth in the terms of the trust. This allows for privacy because a living trust is not a public record in the majority of cases. And the whole process is generally less expensive.

You can hold various assets in a trust such as real estate and bank accounts. It is important that you have a professional draft the trust for you and help you transfer the assets to the name of the trustee.

2. Jointly own real estate or bank accounts.

Putting another name on your assets so you own them jointly is also a way to avoid probate. You can form bank accounts with a joint holder or even real estate with rights of survivorship. Upon either of your deaths, the assets transfer directly to the survivor without the need for probate.

3. Have bank accounts with “payable on death” designated beneficiaries.

There are some bank accounts that allow you to list a beneficiary. Upon your death, the beneficiary will simply receive the assets.

4. Own securities that are transferable upon death to designated beneficiaries.

Similarly, it may be possible to list a beneficiary for your stocks and bonds accounts.

5. List beneficiaries for your IRAs, 401(k)s, or pension plans.

By listing beneficiaries for your IRAs, 401ks and pension plans, you can keep those assets from going into probate. Once you designate a beneficiary (or beneficiaries), it is important to keep the designations up-to-date. There have been many cases in which a person names his or her spouse as a beneficiary and then gets divorced. If he or she dies without updating the IRA, 401(k) or pension plan, the ex-spouse may get the money — regardless of what the will states.

6. Engage in gift giving using trusts and/or a limited partnership.

For more complicated estates, you can create various gift giving trusts that allow for you to gift assets at a discounted value. That way, you can remove more assets from your estate in order to avoid estate taxes. Similarly, a larger estate may use techniques such as a limited partnership to remove assets from the estate — not only to limit estate taxes, but to lessen probate assets. For the basic tax rules involved in gift giving, see the right-hand box.

If you are interested in any of these options or have questions about probate, consult with your estate planning advisor.

Have an estate planning question or concern? Please let us know! Call us at 630.665.2300 or click the button to schedule a complimentary consultation.

No Will? Who Gets the Assets?

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No Will? Who Gets the Assets?

Let’s say an individual dies without a will. Who will inherit his or her assets? The first in line are spouses and children. But what if the individual is single, has no children, no siblings and his or her parents are dead? What if the only relatives the deceased person has are aunts, uncles or cousins? How will the estate be divided?

Without a will, state laws will determine exactly who will receive the assets and who should serve as an executor or personal representative.

In cases of intestacy, there may be a kinship or heirship proceeding to determine the identity of the heirs and the shares of the estate that each individual is entitled to receive. Relatives who come forward have to prove their ancestry. Individuals not only have to prove they are family members; they also have to prove there are no other relatives who can receive the inheritance ahead of them.

A notice may have to be published in a local newspaper stating there is a proceeding to determine kinship or heirship.

The result can be a long, drawn out process.

Example of a Lengthy, Acrimonious Dispute

Before he was a Supreme Court judge, Justice John G. Roberts heard a case involving a bitter heirship dispute that he likened to Charles Dickens’ novel Bleak House. The case followed years of litigation involving matters related to the estate.

Facts of the case: According to court documents, Lew Gin Gee Jung died in 1995 and was survived by five children. Although multiple versions of her will were drafted by her son-in-law, an attorney, she never signed a final version and therefore died intestate.

Shortly after Jung’s death, one of her daughters challenged the heirship of one of the sons named Bow. In a court proceeding, Bow was required to produce a birth certificate to prove that he was a natural born son of Mother Jung. Born in rural China in 1933, Bow could not produce a ”Western style” birth certificate issued contemporaneously with his birth, but instead produced immigration papers and other records indicating that he was the son of Jung.

The Probate Court ordered the exhumation of Jung’s body for DNA testing to settle the heirship dispute. Justice Roberts wrote, “Even Dickens would have been impressed by the modern twist in this chapter of the Jung family’s Bleak House.” (Jung, U.S. Ct. of Appeals for the D.C. Circuit 6/25/04)

The DNA testing established that Bow was the son of Jung and so a judge ordered the personal representative to distribute her share of the estate to him. It was finally disbursed to him more than five years after his mother’s death — only to be involved in more litigation over the amount of interest paid on the delayed distribution.

Other lawsuits were filed by Jung family members alleged intentional infliction of emotional distress, sought attorney’s fees and charged malpractice by the law firm originally drafting the final will not signed by Jung.

A Cautionary Tale

The Jung family dispute over kinship is an extreme cautionary tale about why you should have a will that can stand up to challenge. You don’t want your estate held up for years by individuals claiming a right to inherit your property or having to prove their ancestry.

When Does the State Receive an Estate’s Assets?

As explained earlier, if a person dies without a will, the state where he or she resides in at the time of death determines who will receive the assets under its rules of intestate succession. Only if no heirs can be found does the estate pass to the state government.

If you don’t have close relatives, a will can ensure your assets are distributed to friends, charities, or other parties that are important to you. Even if you do have close relatives, a will can ensure that you, and not the state, decide who gets your property at your death. Consult with your attorney for more information in your situation.

Today’s Family Size Provides Another Reason to Have a Will

For decades, U.S. Census figures have shown that married couples are having fewer children. More people are living alone, unmarried or residing in non-traditional households.

With family sizes shrinking, it may be more difficult to find heirs if a person dies without a will.

Have an estate planning question or concern? Please let us know! Call us at 630.665.2300 or click the button to schedule a complimentary consultation.

No Children but Lots of Cousins? Who Inherits Without a Will?

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for Every Stage of Life.

No Children but Lots of Cousins? Who Inherits Without a Will?

Here’s an issue that sometimes occurs in the administration of an estate: A person dies without a spouse or children. The individual’s nearest family members are cousins or other extended family members and they cannot be found. Who inherits the decedent’s assets?

When a decedent dies without a will (called “intestacy”), the distribution is generally as follows:

1. To the spouse (and possibly part of the assets pass to the children);

2. If there is no spouse or the spouse is predeceased, then assets pass to the children;

3. If there is no spouse and no children, then assets pass to the parents;

4. If there is no spouse, no children and the parents have died, then assets pass to the siblings;

5. If there is no spouse, no children, the parents and the siblings have died, then assets pass to nieces and nephews;

6. If there is no spouse, no children, the parents have died, there are no siblings or the siblings have died without children, then assets pass to the grandparents (if living) and if not, then to aunts and uncles. If the aunts and uncles are deceased, then assets pass to the cousins.

So, in an intestate situation, a person could die and leave only cousins as heirs.

This can also occur even if the decedent has a will and many of the beneficiaries listed have predeceased the person. If a beneficiary dies before the testator, it is called “lapsing” and his or her share goes to other named residuary beneficiaries of the estate (those people who inherit assets after paying specific bequests) unless it is specified otherwise. The laws of each state vary.

Depending on where you live, there may be anti-lapse statutes wherein state law allows certain decedents (usually children of siblings) to inherit if the sibling predeceases the testator even in cases when the testator failed to mention them in the will.

Conversely, if a beneficiary who was intended to inherit part of the residuary estate predeceases the testator, and that beneficiary is not covered by the anti-lapse statute, then that beneficiary’s inheritance will return to the residuary estate, to be inherited by the other residuary beneficiaries. If there are no surviving residuary beneficiaries and the anti-lapse statute does not apply, then possibly extended family members may inherit.

Therefore, depending on the various scenarios, there can be situations when the estate assets would go to extended family members even if there is a will.

If there’s a possibility that the extended family members will inherit from the decedent, it’s a good idea to draft a family tree during the estate planning process. That way, the personal representative of the estate will have a family tree diagram and possibly an affidavit to review when determining which extended family members will inherit the assets of the estate.

Otherwise, it can be extremely time consuming and costly for the personal representative to find the names of the extended family members — and their locations — in order to serve a citation or notice for them to appear in court or become aware of the estate proceeding.

Kinship Proceeding

Further, if there is ambiguity in a family tree, when it comes time to account for and distribute assets, a kinship proceeding may be necessary to resolve who is entitled to inherit from the decedent.

In a kinship matter, the heir or heirs who seek to establish kinship must prove it, or the court will dismiss their petitions to establish kinship and the court will order the assets be deposited for the benefit of “unknown distributees” with the state. No one wants the money to go to the state because proof of kinship cannot be established.

Therefore, it is important for you to have a proper estate plan that sets forth all your wishes and prioritizes your relationships. Speak with your attorney about these issues.

Have an estate planning question or concern? Please let us know! Call us at 630.665.2300 or click the button to schedule a complimentary consultation.

Can Creditors Go After Non-Probate Assets?

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Can Creditors Go After Non-Probate Assets?

When someone dies, one of the first questions that close relatives usually have is whether they are personally responsible to pay the credit card bills of the decedent. They may even start getting telephone calls from creditors asking them to pay outstanding balances.

Close relatives may also want to know: Who is responsible for paying the mortgage of the decedent? If they are entitled to inherit money, can they take their share regardless of the creditors? This article will discuss estate debt issues and the more specific issue of whether a creditor has a right to attach non-probate assets of the decedent.

First, let’s briefly review the process.

Probate assets are assets that are in the name of the decedent only. So if the decedent had a bank account in his or her own name and no beneficiaries are named on a pay-on-death form, the money in the account would “pass through” probate. If the decedent held the bank account jointly with another individual (such as a spouse), in the majority of cases money in the bank account would pass directly to the joint account holder outside of probate.

Likewise, if a house was in the name of the decedent only, it would pass through probate. If the decedent owned the house with someone, as joint tenants with rights of survivorship or with a spouse as tenancy by the entirety, the house would pass directly to the joint owner and outside of probate. This is also true when decedents have beneficiary designations in pay-on-death bank accounts or transfer-on-death brokerage accounts.

So, what rights do creditors have to reach the assets of the decedent to pay off the debts? A creditor can file a claim against an estate for payment of the debt. The executor or personal representative must pay the creditors from probate assets before a final distribution of money is made to heirs. If the personal representative distributes money to heirs when debt is outstanding, a creditor can file a claim or lawsuit against:

1. 1. The heir(s) for the return of the money; or
  2. The estate executor or personal representative if the individual refuses to file a petition to have the heir turn over the money to the estate.

What if there is no money in the estate to pay creditors? A creditor may look to non-probate assets to pay debts. This may happen if there is an indication that the assets of the decedent were large and if there was a transfer of money in order to avoid the debt.

For example, let’s say an individual owes $100,000 to a credit card company and puts assets in a joint bank account prior to death to avoid payment of the debt. The credit card company can file a claim for the money. Creditors could demand that the beneficiaries who inherited assets use them to pay some or all of the debt.

Retirement Accounts, Insurance, Trusts

When it comes to creditors, not all assets in an estate are handled in the same way. Retirement account assets and insurance proceeds with designated beneficiaries are treated differently than other assets and provide more protection from creditors. Money in a revocable trust is subject to creditor claims while assets in an irrevocable trust — when structured properly — are generally exempt from creditor claims.

Knowing the rules for limiting creditor exposure is important for those structuring their estates and for heirs of decedents with outstanding debts. Your attorney can help you with these issue.

Have an estate planning question or concern? Please let us know! Call us at 630.665.2300 or click the button to schedule a complimentary consultation.

Unhappy with a Will? You Might Be Able to Challenge It.

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Unhappy with a Will? You Might Be Able to Challenge It.

There are instances when heirs are not happy with the terms of a person’s will.

When that is the case and the executor submits the will to probate, the heirs may file objections to the submission of the will. Four reasons for a challenge can be:

1. Improper execution. This objection is usually rebutted more easily than others if an attorney supervised the execution of the will. That is because certain procedures must be followed when someone signs a will and the signing must be witnessed.

If an attorney supervises the process, there is a presumption that the document was executed properly. While that doesn’t mean the will can’t be challenged for improper execution, in most cases, the objection would be denied.

2. Incapacity. If the person signing the will lacks capacity, someone could launch a challenge arguing that the individual didn’t know what he or she was signing or couldn’t know what the will said due to a diminished mental or physical state. However, the question of whether someone lacks capacity is not cut-and-dry.

Case law has shown that even if a person has Alzheimer’s, the will could be found valid if the individual was lucid during the signing. Determining capacity can be subjective, although medical evidence, such as a diagnosis or an opinion from a doctor, can make a difference.

3. Undue influence. Most of the time undue influence involves a person in control and an individual who is elderly or lacks capacity. The following is an example of a situation that could show evidence of undue influence:

An adult child lives at home with an aging father who depends on his child.
The child refuses to let anyone visit.
The father believes his other children are not visiting.
The father leaves his other children out of his will.

4. Fraud.In some cases the will could be fraudulent or there could be fraud involved in the drafting of the will.

An obvious example is when the signature on the will is not that of the person presumably signing the document. This is difficult to argue, however, because the signature must be witnessed. The witnesses and the attorney supervising the signing would have to be lying.

Speak with your attorney if you find yourself in a situation where there’s a need to object to the probate of a will.

Have an estate planning question or concern? Please let us know! Call us at 630.665.2300 or click the button to schedule a complimentary consultation.

How to Wrap Up an Estate

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for Every Stage of Life.

How to Wrap Up an Estate

If you’re an executor or personal representative of an estate — or even an heir — eventually you want closure on the estate. Sometimes, estate proceedings continue to be open for years with no end in sight.

There are certain steps that must be taken to close the estate. This article describes the general procedures. The exact process depends on state law.

Will or No Will

When someone dies, an estate proceeding is necessary if the person owned separate assets without designated beneficiaries. If there’s a will, the executor or personal representative named in it should open an estate proceeding to probate the will.

If there’s no will, a family member — usually a spouse or child — will commence an estate proceeding seeking to become the court-appointed administrator of the estate.

In both cases, the opening of an estate is done through the local probate court.

After obtaining the authority from the court to administer an estate, and after opening an estate bank account, the executor or personal representative must perform many tasks. For example, he or she will “collect the assets.” This might involve selling real estate, stocks and other property to turn into cash for deposit. It also might involve transferring certain assets to the beneficiaries as set forth in the will.

Stumbling Blocks

Difficulties and delays can arise if there are creditors, multiple beneficiaries, disputes among family members and other issues that might include heirs that cannot be located, a will that has contradictory language or internal court delays.

It can take time to sell certain assets, if necessary. For example, some people die owning businesses, multiple homes, cars, or boats, or unusual assets, such as airplanes. The market for these items might be down because of the economy or other factors.

In addition to collecting the assets, the executor or personal representative pays the debts and taxes. In some cases, money from selling the assets is used to pay debts.

Some people who are unfamiliar with the process may think that an executor or personal representative can collect and distribute assets within a short period of time. However, even if the estate has no outstanding issues, an executor or personal representative cannot seek to close the estate until after the time:

Creditors are allowed to make a claim (usually five to seven months, depending on the state); and
Outstanding estate taxes are paid (usually within nine months of the estate opening, depending on any extensions). The IRS and state tax authorities issue estate tax closing letters when an estate tax return is accepted. However, keep in mind that most estates are not large enough to owe estate taxes. The federal estate tax exemption is $5.60 million for 2017 (up from $5.49 million in 2017).

Distributing the Assets

Depending on all these factors, it may be difficult to finalize the collection and distribution of assets. In any event, when the time comes to distribute them, the executor or personal representative can:

Contact the heirs and beneficiaries and inform them of their shares.
Provide an informal accounting to the heirs. This includes any fee or compensation the executor or personal representative wants to receive for his or her services, according to state law. An informal accounting may prevent the need for a formal accounting to the court if all the heirs are in agreement as to their shares of the estate and the distributions they will receive.

Prior to distribution, one of the heirs may demand a formal accounting. If so, the executor or personal representative may have to submit one to the court and the court would review it. The court would then decide how to settle the estate.

However, as explained above, a formal accounting is generally not necessary if the beneficiaries and heirs are in agreement on their shares and the expenses. If so, they sign written releases or waivers.

This is what usually happens. However, there are times when beneficiaries or heirs refuse to sign releases. In those situations, the executor or personal representative may consider filing for a judicial accounting so that the court can review and approve it. At that time, the executor or personal representative could request the court to release him or her from any liability.

Note: In some cases, courts require the executor or personal representative to file with the court any tax returns that have been filed with taxing authorities prior to closing the estate.

Don’t Wrap Up Too Soon or Take Too Long

Although it may be tempting to wrap up an estate and distribute the assets, an executor or personal representative must be cautious about moving too quickly. If the assets are distributed and there are still debts and taxes owed, the executor or personal representative could be held personally lia8ble.

How long does it take? It depends on many factors including the size and complexity of the estate. It’s not unusual to take a year or longer. On the other hand, if the executor or personal representative doesn’t move things along in a reasonable amount of time, the court, the heirs or the beneficiaries may intervene. (Some states require the executor or personal representative to provide an affidavit explaining what is causing the estate to stay open for so long.)

Keep in mind that heirs and beneficiaries often feel the process is moving too slowly and their inheritances are being delayed. Communication about the status of the estate may help prevent disputes.

Navigate the Challenges

Bringing an estate to a close can be time consuming and complicated. Contact your attorney for assistance if you’re an executor, personal representative, beneficiary or heir and you have questions about the process of closing an estate.

Have an estate planning question or concern? Please let us know! Call us at 630.665.2300 or click the button to schedule a complimentary consultation.

Want to Avoid Probate? Here Are 6 Ways to Do It

Ways to Avoid Probate

1. Form a living trust.

2. Jointly own real estate or bank accounts.

3. Have bank accounts with “payable on death” designated beneficiaries.

4. Own securities that are transferable upon death to designated beneficiaries.

5. List beneficiaries for your IRAs, 401(k)s, or pension plans.

6. Engage in gift giving using trusts and/or a limited partnership.

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No Will? Who Gets the Assets?

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No Children but Lots of Cousins? Who Inherits Without a Will?

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Can Creditors Go After Non-Probate Assets?

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Unhappy with a Will? You Might Be Able to Challenge It.

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How to Wrap Up an Estate

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