Dissolving the Mystery of Probate

Probate can be avoided with proper estate planning, or certain assets can be placed outside of the probate process.

The Street’s recent article on this subject asks “What Is Probate and How Can You Avoid It?” The article looks at the probate process and tries to put it in real-life terms.

Probate is an estate planning process that works within a probate court with a probate judge presiding over the proceedings. Usually, surviving families and other interested parties initiate a probate process, to address issues relating to the deceased individual’s estate settlement. These include:

  • The handling of the deceased’s valid will;
  • Properly citing and categorizing the deceased’s assets;
  • Appraising the deceased’s estate and property;
  • Paying off any of the deceased’s existing debts; and
  • Distributing the deceased’s property to those directed by the will (or, if there’s no will, the probate court will direct the distribution of estate assets, according to the laws of intestacy).

The executor handling the deceased’s estate will typically start the process. Here are the basic steps:

File a Petition. The estate’s executor will file a request for probate where the deceased resided.  The court will then assign a date to confirm the executor and, once that is done, the probate judge will officially open the probate case.

Notice. The executor must send a notice that the deceased’s estate is officially in probate to all applicable beneficiaries, heirs, debtors and creditors.

Inventory Assets. The executor will then collect, list and present a value for all of the deceased’s assets and supply this to the probate court.

Pay the Bills. The executor will need to pay all outstanding debts owed by the estate.

Complete Any Tax Returns. The estate may also have existing tax returns that need to be filed. An accountant can be hired by the estate to work on this, or the executor may choose to file the taxes on his or her own.

Pay the Heirs. The executor can now distribute the remainder of the estate to any heirs, according to the will’s instructions.

Close the Estate. Finally, the executor will file paperwork with the court and file to close the estate.

An experienced estate planning attorney licensed to practice in your state will be able to explain what strategies are used to avoid probate, how to remove certain assets from the process, or whether it needs to be avoided at all. In some regions, probate is swift, while in others it is long and tiresome. A local estate planning attorney is your best resource.

Reference: The Street (July 29, 2019) “What Is Probate and How Can You Avoid It?”

How Do I Avoid Probate for a CD?

There are three categories of property, but just one requires probate to access it when the owner dies.

nj.com recently published an article that asked “When I die, how can I avoid probate for this account?” The article explains that there is property that passes by operation of law. This type of property is anything owned jointly with right of survivorship.

Sometimes you’ll see these types of accounts labeled with “JTWROS”—joint tenancy with right of survivorship.

With joint tenancy with right of survivorship, when one co-owner dies, the property automatically passes by law to the surviving co-owner. There’s no probate involved. This is the type of set up that married couples usually have for most of their accounts and property, such as the family home.

A second type of property is assets that are controlled by a contract. This includes life insurance, retirement accounts, and any non-retirement accounts that have beneficiaries designated upon death.

These designations trump the decedent’s will. Therefore, it doesn’t matter if the will says to give the life insurance proceeds to someone else. The beneficiary designated on the policy will receive the proceeds. Those proceeds also pass outside of probate directly to the named beneficiary. These types of accounts are often known as as “POD” (payable on death) or “TOD” (transfer on death) accounts.

The third type of property is the catch-all: everything else. This will include accounts that are owned solely by the person who died, with no POD or TOD designation.

In order to avoid the probate process to access a CD or any other account in only a spouse’s name, you can either make the account jointly owned by husband and wife with right of survivorship, or have your spouse designate you as a beneficiary upon death. Both options avoid the need to probate the will to access that CD account.

Talk to an experienced estate planning attorney about getting the titles to your property straight, as well as any other questions you have about your estate plan.

Reference: nj.com (June 6, 2019) “When I die, how can I avoid probate for this account?”

What Do I Do With My Dad’s Timeshare When He Passes Away?

When a timeshare owner dies, the timeshare will usually be part of the deceased owner’s estate, according to nj.com’s recent article, “My dad had a timeshare and died without a will. I don’t want it. What do I do?” The contractual obligations of the timeshare owner become the responsibility of the next-of-kin or the beneficiaries of the estate.

When the timeshare company hears of the owner’s death, they may keep sending letters to him for his expenses. Is there any way that the owner’s children could be held responsible for the timeshare expenses?

Legally speaking, a timeshare is an agreement or arrangement in which parties share the ownership of or right to use property. Each owner is entitled to use the property for a specific period of time. Some examples of timeshare ownership are a vacation club at a tropical resort or a villa at a ski destination.

There are three basic types of timeshare programs: fee simple, leasehold, and right-to-use (‘RTU’). In addition, there are some variations of RTUs, like points systems and fractional/private residence clubs.

The executor or administrator of the estate will need to contact the timeshare company and/or locate a copy of the owner’s contract to find out what the financial and legal obligations are under the contract.

In addition, the executor may decide to contact an estate planning attorney, especially if the timeshare is out-of-state. This is important as the laws concerning timeshare agreements and inheritances vary from state to state.

The next-of-kin and estate beneficiaries do have the option of declining their inheritance, including a timeshare. If they want to do this, they’ll typically be required to sign and file an inheritance disclaimer document.

If the timeshare is disclaimed, it would pass to the next individuals or entities with a right to inherit.

If the estate fails to make the payments on the timeshare while the owner’s estate is being probated, fees and penalties may accrue. At that point, the timeshare company and the property manager may file a lawsuit against the estate to get their money due them pursuant to the timeshare agreement.

However, if the property is disclaimed by all of the heirs, the property manager may likely foreclose on the timeshare, so any accrued debt would be paid from the estate’s assets. That foreclosure shouldn’t impact the credit of any heir who disclaimed the timeshare.

Reference: nj.com (June 3, 2019) “My dad had a timeshare and died without a will. I don’t want it. What do I do?”