Probate and Estate Settlement: Transfering of Estate Property
Transfer of Estate Property - The Process
Estate Settlement is simply the legal process by which property of a deceased person is transferred to their heirs or beneficiaries.
A Will is a written and legally executed document by an individual (testator) who wants his or her directions known and implemented, regarding the distribution of their property and assets after their death i.e., Estate Settlement. Until death the will document has no power or authority. Prior to death a will can be changed an unlimited amount of times by the testator. If there are various wills on file the latest dated (and properly executed) will is the instrument that becomes activated on death. (see The Will)
The Personal Representative
One of the rights of the testator in their Will is to appoint and name an adult person or entity as the Personal Representative or Executor, Executrix. The Personal Representative or Executor can be a person, an attorney, or a trust company (or a combination) appointed in the Will to carry out the instructions of the deceased and to do what is necessary to (properly) settle the deceased’s probate estate. It is common to have a primary and a secondary Personal Representative (to serve as a backup), if the primary cannot or elects not to serve. There also can be more than one Personal Representatives named to share in the duties. In some states, the Personal Representative must also be a resident of the decedent’s state (non-related) or be a relative of the testator. If no one qualifies under the Will the court may appoint a curator to protect the estate assets until a Personal Representative is appointed.
Death without a Will
If the deceased has not left a valid will, they are declared to die intestate and thus they have failed to designate a personal representative. In this circumstance, the state probate court in which the decedent domiciled (lived) will assign an Administrator. In most cases the spouse or adult children are named the Administrator. State specific statutes determine the procedures for the settlement of the estate and the beneficiaries and their distributable shares. (see intestacy)
Probate is the legal procedure for settling a decedent’s estate. Probate laws are state specific and are implemented by county probate courts and offices within the county the deceased was domiciled. Some property or assets may not be subject to the procedures of probate.
Types of Ownership of Property
Tenants by Entireties
Only a husband and wife can own property in tenants by entireties. When real property is owned by husband and wife, it is assumed that the title is held as tenants in entireties. When one spouse dies the other spouse gets the entire property and does not go through probate. If the decedent owned property in their sole name at the time of death probate is required
Joint Tenants with Rights of Survivorship
The titling of property Joint Tenants with Rights of Survivorship is a form of ownership between two or more unmarried persons. When a tenant (person) dies the surviving persons get the property and it does not have to go through probate.
Tenants in Common
Jointly held owned property (excluding the spouse) which is not titled joint tenants with rights of survivorship will be legally presumed to be held in tenants in common. Under the tenants and common ownership each share of the property of the deceased goes to the heirs or beneficiaries as determined by the will or state statute and will be pass through the probate procedure.
Transferring non Probate Property
In some circumstances, property titled tenants by the entireties and joint tenants with right of survivorship can be transferred to the surviving tenant by filing a certified copy of the death certificate with the clerk of the circuit court. A certified copy of the death certificate may also be required documentation with the Department of Motor Vehicles for the transferring of the title and registration of an automobile. Accounts with banks or financial institutions will also need a certified copy of the death certificate to remove the decedents name from an account.
Trust and Trustees
A Living Trust (inter Vivos) is a trust established by the decedent (grantor) during their life-time and providing for disposition (distribution) of the trust assets following their death. These assets will be handled by the stated trustee in the governing document of the trust. The trustee on the trust may be a different entity and have different duties vs. the Personal Representative named in the will.
Living or “Pour-over” Trust
A common estate planning tool is pour-over trusts. Under this document assets are “poured over” at death from the probate estate into a previously established trust. This pour-over strategy avoids probate but not estate taxes.
Another planning strategy is to have the Will pour-over into the trust which may offer greater flexibility than what is available under a Will. The terms of the trust may articulate a special need of beneficiaries and stipulate a method to meet these needs. When assets are distributed to beneficiaries under a trust the Estate Settlement is done by the trustee of the trust.
Completing the Settlement of an Estate
The Personal Representative named in the Will and the Trustee named in the Trust has the power, responsibility and the legal duty to effectively complete the Estate Settlement process.
(See Duties of the Personal Representative and Trustee)