Bryant - Course 6. Estate Planning. 8. Probate Process

Question 1

Module Overview

We will learn what is meant by a validly executed will, as well as how the probate estate is administered. We will also discuss probate fees.

The second lesson will outline the advantages and disadvantages associated with the probate process, including ancillary probate.

Answer 1

To ensure that you have an understanding of the probate process, the following will be covered in this module:
* The Probate Process
* Avoiding Probate

Question 1

Module Introduction

A great deal has been written concerning the time and expense associated with the probate process.

Probate is a court proceeding to legally pass title to assets owned individually that are not otherwise passed by beneficiary designation, operation of law, or other contractual provisions. Since probate is a court proceeding, it is public in nature. In fact, it is during the probate process that any disgruntled heir can contest a will (for various reasons), and a creditor of the decedent can attach the assets of the estate to satisfy claims. For this reason, probate may be expensive and time-consuming, and the costs associated with probate are therefore separate and distinct from the payment of estate tax liability. Additionally, planning an estate in order to minimize estate tax liability may not necessarily prevent the decedent’s estate from exposure to the probate process.

Answer 1

The Probate Process module, which should take approximately two and a half hours to complete, will describe the characteristics of the probate process. The module also describes the advantages and disadvantages associated with the probate process.

Upon completion of this module, you should be able to:
* Define testate and intestate estates,
* Describe the probate process, particularly notice of probate,
* Recall what is meant by letters testamentary,
* Determine in what situations a will has to be proven to be a valid document,
* List the conditions to be met to establish proof of valid execution of a will,
* Describe the three reasons to avoid probate,
* Describe three reasons to probate an estate, and
* Recall the two ways to avoid ancillary probate.

Question 2

Section 1 - The Probate Process

This lesson will discuss the most common characteristics associated with the probate process. In the case of a decedent dying with a will, the will is filed with the probate court in the county of the decedent’s residence. If the decedent dies without a will, probate administration is initiated by filing a petition to appoint a personal representative or other fiduciary to administer the probate estate. Although the surviving spouse often is named as the petitioner for both testate estates (estates with a will) and intestate estates (estates without a will), any interested party may file the petition and initiate the probate process.

Once a will has been filed with the probate court, it is generally admitted to probate. Interested parties then have a stated period within which to challenge or set aside the probate of the will. Once the will is admitted to probate, notice must be given to all interested parties.

In both testate and intestate estates, all estate creditors can file their claims with the probate court. Once all claims are filed, and the personal representative (also known as the Executor if the estate is a testate estate or the Administrator if the decedent dies intestate) has been given testamentary letters, further administration of the estate can proceed.

Answer 2

If the estate is a testate estate, the will must be proven to be a valid document. This requires either a hearing at which proof of valid execution of the will must be established or a signed statement from witnesses declaring that the will was validly executed.

Once the will has been proven to be a valid document and testamentary letters have been issued to the personal representative, the probate estate administration occurs. Probate fees include expenses incurred by the estate as a part of the probate process, such as appraisal fees for probate assets, court filing fees, attorney’s fees, and other administrative expenses.

Once all claims, debts, and taxes have been paid and all property has been distributed, the estate may be closed. This usually occurs after a final accounting or report is filed with the probate court and a petition to discharge the personal representative is filed with the court.

To ensure that you have an understanding of the probate process, the following topics will be covered in this lesson:
* Characteristics of the Probate Process

Upon completion of this lesson, you will be able to:
* Define testate and intestate estates,
* Describe the probate process,
* Recall what is meant by letters testamentary,
* Determine whether a will has to be proven as a valid document,
* List the conditions to establish the valid execution of a will,
* Define self-proving affidavit, and
* Identify probate fees.

Question 3

What are typical Characteristics of the Probate Process?

Answer 3

Each state has its specific procedures dealing with the probate process. However, there are characteristics of the probate process common to all states.

The probate courts grant a family allowance to support the decedent’s spouse and minor children during the estate administration process.
* The homestead and exempt property allowance also protect the family’s property from the decedent’s unsecured creditors or by the terms of the decedent’s will.
* The homestead applies to the family home and adjacent property subject to acreage limitations.
* Exempt property pertains to cars, household goods, and tools used in business.
* Creditors of the estate may not get fully paid, or other property may be sold instead to satisfy creditor claims.

Question 4

Which of the following property interested will avoid the probate process?
* Property transferred by a Pour-over will into a trust
* An annuity with a named beneficiary
* Community property
* Property passing from a will into a Testamentary Trust

Answer 4

An annuity with a named beneficiary

Property that passes through a will or intestacy must always go through the probate process.

Examples of property interests that are probate assets include:
* Fractional interests held in Tenancy-in-Common property
* Community property
* Property passing from a will into a Testamentary Trust
* Property transferred by a Pour-over will into a trust
* Homestead and exempt property allowances

An annuity with a named beneficiary is considered a will substitute and will avoid the probate process.

Question 5

Personal property is probated in the state __ ____??____ __.
* of domicile
* of the beneficiary’s residence
* of death
* where it is located

Answer 5

of domicile

• Personal property is probated in the state of domicile, the state of the decedent’s personal residence.

Question 6

Each of the following bypass the probate process EXCEPT:
* Fractional interests held in Tenancy-in-Common property.
* Property within a trust.
* Contracts payable to named beneficiaries.
* Assets passing by operation of law

Answer 6

Fractional interests held in Tenancy-in-Common property.

• Many financial planners assist their clients in creating estate planning strategies to ensure that their property interests will avoid probate. They will make use of techniques known as will substitutes which bypasses probate administration.

Examples of a will substitute include:
* property that passes by operation of law,
* property that is contained within a trust, and,
* property that is transferred to a named beneficiary.

Fractional interests held in Tenancy-in-Common property are considered probate assets.

Question 7

__ ____??____ __ is a procedure that disposes of real estate of the decedent that is located in a state other than that of the decedent’s residence.
* General administration
* Informal probate
* Ancillary probate
* Summary administration

Answer 7

Ancillary probate
* Ancillary probate is a procedure that disposes of real estate of the decedent that is located in a state other than that of the decedent’s residence.

Question 8

What happens when Someone Dies With a Will?

Answer 8

In the case of a decedent dying with a will, the will is filed with the probate court in the county of the decedent’s residence.
* Of course, if the decedent dies without a will, no document is filed.

A petition to have the will admitted to probate is also filed with the court.
* This petition initiates the probate administration of the estate.

Question 9

Define Testate

Answer 9

A testate estate is one where the separately-owned assets of the decedent’s estate transfer under the will’s provisions.

Although the surviving spouse is often named the petitioner for testate estates, any interested party may file the petition and initiate the probate process.

Question 10

What happens when Someone Dies Without a Will?

Answer 10

In the case of a decedent dying without a will, probate administration is initiated by filing a petition to appoint a personal representative or other fiduciary to administer the probate estate.

Question 11

Define Intestate

Answer 11

An individual who has died without a will has left an intestate estate.

Just as we have seen with the testate estate, the surviving spouse is often named the petitioner for intestate estates. However, any interested party may file the petition and initiate the probate process.

Question 12

How do you Admit a Will to Probate?

Answer 12

In the case of a decedent dying with a will, the will and a petition to have the will admitted to probate is filed with the probate court. This petition initiates the probate administration of the estate, and both the will and the petition must be filed with the court.

When a decedent dies without a will, probate administration is initiated by filing a petition to appoint a personal representative or other fiduciary to administer the probate estate.

Once a will has been filed with the probate court, it is generally admitted to probate.
Interested parties then have a stated period to challenge or set aside the probate of the will.

Question 13

Describe the Notice of Probate

Answer 13

Generally, once the will is admitted to probate, most states require that notice be given to all interested parties. Notice can occur through written notification (letter) or publication (newspaper).

If an interested party is not given notice, the personal representative’s actions can be challenged. In some states, an interested party can waive the written notice requirement.

For estates of decedents dying without a will, the process is similar. The individual named as personal representative of the estate must give notice to all the interested parties informing them that the court has appointed the personal representative and that they are interested parties. This notice is usually published in a local newspaper.

Question 14

Describe how to Avoid Litigation

Answer 14

In June 1988, the U.S. Supreme Court ruled that mere publication in a newspaper was insufficient where the estate had actual knowledge of the creditor’s existence and had failed to provide written notice or actual notice of the deadline for filing the creditor’s claims.

Therefore, to avoid litigation by unnotified creditors, attorneys and other estate representatives should provide written or actual notice to all creditors of a decedent’s estate.

Question 15

Describe how Creditor’s Claims are Handled

Answer 15

In both testate and intestate estates, all estate creditors can file their claims with the probate court.
* Generally, if a creditor fails to file a claim within a stated period following the admission of the will to probate (six months) or following the appointment of the personal representative (six months), the creditor’s claim is barred.

Question 16

Define Letters Testamentary

Answer 16

Letters testamentary are letters of authority the probate court gives to act on behalf of the estate as fiduciary.
* Once all claims are filed and the personal representative-the executor, if appointed by a will or the administrator if appointed by court-has been given letters testamentary, further administration of the estate can proceed.

Practitioner Advice: Remember that a decedent can die with a will but still have the probate court appoint the administrator.
* For example, all named executors have died or are incapacitated.
* In this case, the letters testamentary would be given to a court-appointed administrator.

Question 17

Practitioner Advice:

Practitioner Advice: Remember that a decedent can die with a will but still have the probate court appoint the administrator.
* For example, all named executors have died or are incapacitated.
* In this case, the letters testamentary would be given to a court-appointed administrator.

Answer 17

Exam Tip: On the CFP® Exam, you may be asked to calculate the probate estate.
* This refers to any property or assets that will go through the probate process.

Question 18

How is a will proved to be valid?

Answer 18

Valid Executed Wills
In order for a will to be valid, the testator must have complied with the execution requirements for his or her state of residence, or the state in which it was executed, if a state other than the state of the decedent’s residence.
* Personal property is probated in the state of domicile, the state of the decedent’s personal residence.
* Real property is probated in the state where it is located or situs.

To prove that the will is a valid document requires either:
* A hearing at which proof of valid execution of the will must be established, or
* A signed statement from witnesses, declaring that the will was validly executed.

Proof of valid execution of a will (an execution requirement in all states) is established if:
* The decedent intended the document to serve as his or her last will and testament or the decedent signed or acknowledged the document as his or her last will and testament,
* The decedent signed it in the presence of two or more disinterested witnesses, and
* The witnesses signed and acknowledged it in the presence of the maker of the will.

The statement that the will is a validly executed will can be waived if the will contains a self-proving affidavit.
* The self-proving affidavit contains the sworn statements of the witnesses that the will met all valid execution requirements for the state in which it was executed.
* As a result, a strong presumption arises that the will was validly executed.

Question 19

Describe Administration of the Probate Estate

Answer 19

Once the will has been established as valid, the letters testamentary are issued to the personal representative.
* The personal representative is also known as the Executor (male), or Executrix (female).
* The Executor(trix) typically has been named by the testator in the will.
* Once the letters testamentary have been issued, administration of the probate estate begins.

One of the responsibilities of the personal representative is the payment of estate taxes (federal and/or state) and/or inheritance tax (state).
* The personal representative must also file accounting documentation with the probate court notifying the court of probate assets that have been distributed as well as the claims of creditors that have been filed and paid.

If a deed or deeds are necessary to transfer title to real estate, this is issued by the probate court before completion of probate.
* Deeds are different from wills in that they are written as irrevocable and cannot be contested for undue influence.
* Beneficiaries or heirs who receive property from the estate are usually required to sign a written receipt that verifies that they have actually received the property.

Exam Tip: On the CFP® Exam, you may be asked to calculate the probate estate.
* This refers to any property or assets that will go through the probate process.

Question 20

What are Probate Fees?

Answer 20

Probate fees are any expenses incurred by the estate as a part of the probate process.

Probate fees include:
* Appraisal fees for probate assets (e.g., real estate, business interests, etc.),
* Court filing fees,
* Attorney’s fees, and
* Other administrative expenses.

Practitioner Advice: During the probate process, a will may be contested.
* And with such contests, the costs of probate increase.

Question 21

When may the estate be closed?

Answer 21

The estate may be closed after the following:
* All claims and debts have been paid,
* All taxes have been paid,
* All property has been distributed, and
* A final accounting or report is filed with the court.

A petition to discharge the personal representative is filed with the court. If the personal representative was required to file a bond or oath with the court, it is usually released at this point. The court approves the discharge of the personal representative if it is satisfied with all accountings and other reports.

Once the estate is probated, and the personal representative has been discharged, probate has been completed.
* However, there are circumstances in which the estate may be reopened, such as the discovery of new assets, an incomplete accounting, or that an interested party has perpetrated a fraud on the court.

Question 22

Describe the Completion of Probate

Answer 22

• Closure of Estate. The estate may be closed after all claims and debts have been paid, all taxes have been paid, all property has been distributed, and a final accounting or report is filed with the court.
• Filing of Petition to Discharge. A petition to discharge the personal representative is filed with the court.
• Releasing Bond or Oath with Court. If the personal representative was required to file a bond or oath with the court, it is usually released at this point.
• Approval of Discharge by Court. The court approves the discharge of the personal representative if it is satisfied with all accounting and other reports.
• Completion. Once the estate is probated, and the personal representative has been discharged from his or her duties, the probate process is complete.

Question 23

Section 1 - The Probate Process Summary

The probate process is described in this lesson with characteristics common to all the states. If a decedent dies with a will, the will is filed with the probate court. When a decedent dies without a will, probate administration is initiated by filing a petition to appoint a personal representative or other fiduciary to administer the probate estate. Although the surviving spouse is often named as the petitioner for both testate estates (estates with a will) and intestate estates (estates without a will), any interested party may file the petition and initiate the probate process.

In both testate and intestate estates, all estate creditors have an opportunity to file their claims with the probate court. Once all claims are filed, and the personal representative has been given letters testamentary, further administration of the estate can proceed. For testate estates, an additional procedural step is necessary. The will that has been admitted to probate must be proven to be a valid document.

In this lesson, we have covered the following:
* Testate Estate: An estate where the decedent has died with a will.
* Intestate Estate: An estate where the decedent has died without a will.
* Letters testamentary: A letter of authority given to a person by the court to act on behalf of the estate as fiduciary.

Answer 23

• A validly executed will: A will that complies with the execution requirements for that state or for the state in which it was executed if it was a state other than the state of the decedent’s residence.
• The self-proving affidavit contains the sworn statements of the witnesses that the will meets all valid execution requirements for the state in which it was executed.

Administration of the probate estate usually involves:
* An inventory of all probate assets,
* Payment of creditors’ claims, and
* Distribution of the probate estate according to the terms of the decedent’s will or according to the laws of intestacy if the decedent dies without a will.

Probate fees include:
* Appraisal fees for probate assets,
* Court filing fees,
* Attorney’s fees, and
* Other administrative expenses.

Closing of the probate estate may be done after:
* All claims and debts have been paid,
* All taxes have been paid,
* All property has been distributed, and
* A final accounting or report is filed with the court.

Question 24

Publishing a probate notice in a newspaper is enough to avoid litigation by unnotified creditors.
* False
* True

Answer 24

False

• The U.S. Supreme Court ruled that mere publication in a newspaper was and had failed to provide written notice or actual notice of the deadline for filing creditor’s claims.
• Therefore, to avoid litigation by unnotified creditors, attorneys and other representatives of the estate should provide written notice or actual notice to all creditors of a decedent’s estate.

Question 25

Keeping an inventory of all probate assets, payment of creditors’ claims, and distribution of the probate estate according to the terms of the decedent’s will, or according to the laws of intestacy if the decedent dies without a will, are functions of:
* The personal representative
* The Probate Court
* The decedent’s spouse, if surviving
* The estate’s attorney

Answer 25

The personal representative

• Administration of the probate estate occurs only after the letters testamentary have been issued to the personal representative.
• The administrative functions of the personal representative are an inventory of all probate assets, payment of creditors’ claims, and distribution of the probate estate according to the terms of the decedent’s will, or according to the laws of intestacy if the decedent dies without a will.

Question 26

Match the following with the correct description:
Testate estates
Intestate estates
Decedent dying without a will
Decedent dying with a will

• Left behind by a decedent with a will
• The will is filed with the probate court
• Probate administration is initiated by filing a petition for the appointment of a personal representative or other fiduciary
• Left behind by a decedent without a will

Answer 26

• Testate estates - Left behind by a decedent with a will
• Decedent dying with a will - The will is filed with the probate court
• Decedent dying without a will - Probate administration is initiated by filing a petition for the appointment of a personal representative or other fiduciary
• Intestate estates - Left behind by a decedent without a will

Question 27

Section 2 - Avoiding the Probate Process

There are many reasons (publicity associated with the probate of the estate, lengthy-time delays, and high costs) to avoid probate.
* Conversely, there are several reasons to probate an estate, the most important of which may be the judicious settlement of disputes by the probate court, which is an impartial decision-making body.

If a person died owning real estate in several states, the decedent’s estate would be subject to ancillary probate.
* Ancillary probate is a proceeding that disposes of the decedent’s real estate that is owned in a state other than the decedent’s state of domicile.

Answer 27

To ensure that you have an understanding of avoiding the probate process, the following topics will be covered in this lesson:
* Reasons for Avoiding Probate
* Assets that Avoid Probate
* Reasons for Probate
* Ancillary Probate Procedure

Upon completion of this lesson, you will be able to:
* Describe three reasons to avoid probate,
* Describe which assets avoid probate,
* Describe three common reasons to probate an estate,
* Recall what is meant by an ancillary probate procedure,
* Recall the two ways to avoid ancillary probate, and
* Recall the common elements for a valid trust.

Question 28

What are Reasons for Avoiding Probate?

Answer 28

Despite the usefulness of the probate process, there may be reasons why an estate owner may want to avoid probate. The most common reasons for avoiding probate are discussed briefly in the following topics.

Publicity
The estate owner may wish to avoid the publicity associated with the probate of the estate.
* Unless specifically instructed by the probate court, when a will is probated, the will and all documents filed with the probate court become public records.
* Therefore, many estate owners who choose not to have their intentions made public transfer their estate assets utilizing assets and strategies, which are probate substitutes.

Lengthy Time Delays
The probate process may also involve lengthy time delays. Remember, it is during the probate process that disgruntled heirs may challenge the validity of the will. The estate owner can avoid lengthy time delays by transferring property to beneficiaries in a way that avoids probate.

Costs
Costs involved in the probate of an estate are likely to be higher than if probate is avoided because most administrative and attorney’s fees are often based on a percentage of the value of the probate estate.

Typically, probate costs are a percentage of the probate estate. Therefore, the greater the amount of property transferred outside the probate estate, the smaller the amount of administrative and legal expenses incurred by the estate.

Practitioner Advice: Please note that in larger estates, especially concerning attorney’s fees, the personal representative for the estate may negotiate payment on an hourly basis as opposed to a percentage of probate estate basis.

Question 29

Choose the potential causes of probate time delay that estate owners may face. (Select all that apply)
* Property disputes
* Tax return complications
* Accounting errors
* Complications involving property receipts

Answer 29

Property disputes
Tax return complications
Accounting errors
Complications involving property receipts
* Each of these items may cause a time delay in the probate process.

Question 30

Practitioner Advice:

Practitioner Advice: Please note that in larger estates, especially concerning attorney’s fees, the personal representative for the estate may negotiate payment on an hourly basis as opposed to a percentage of probate estate basis.

Question 31

What types of property goes through probate?

Answer 31

All property interests that are individually owned are included in a decedent’s estate at death and are transferred to others according to provisions in a will or through intestate succession.
* Property that passes through a will or intestacy must always go through the probate process.

Examples of property interests that are probate assets include:
* Fractional interests held in Tenancy-in-Common property
* Community property
* Property passing from a will into a Testamentary Trust
* Property transferred by a Pour-over will into a trust
* Homestead and exempt property allowances

Many financial planners assist their clients in creating estate planning strategies to ensure that their property interests will avoid probate.
* They will use techniques known as will substitutes, which bypasses probate administration.

Question 32

AUDIO - Simply Stated: Avoiding Probate

• Assets will go through probate if they are separately owned and explicitly stated in one’s will, or not in a will
• Probate process - overseen by the courts
• Downsides: time-consuming, costly, public
• We want to avoid the probate process with TLC:
• T - Trust
• L - Law or Operation of Law
• C - Contract

Answer 32

• JTWROS
• Contract with stated beneficiary - circumvents and goes straight to beneficiary

Question 33

Describe Will Substitute: Trusts

Answer 33

A trust is a fiduciary relationship in which property is held by one (or more) person(s) for the benefit of one (or more) person(s).
* Trusts can be used to transfer assets and property to beneficiaries without going through the probate process.

Think of the players in a trust as a three-legged stool. The “first leg” of the trust stool is the person who creates the trust and who is generally called a settlor, trustor, or grantor.
* The grantor typically executes a trust document and transfers property to the person who will be responsible for administering the terms of the trust, who is called a trustee, and who forms the “second leg” of the trust stool.
* The person for whose benefit the trustee administers the trust is called a beneficiary, which completes the “third leg” of the three-legged trust “stool.”
* The property held in trust is often called the trust corpus or res.

Question 34

AUDIO - Simply Stated: Will Substitute - Trusts

• Trusts can function as will substitutes
• Trust is a container into which assets (real property, stock or intangible (patents, copyrights))
• Grantor sets up the trust terms and puts assets into the trust
• Trustee oversees and monitors the trusts
• After a set term or lifetime, assets will pass onto beneficiaries or another trust
• Gives privacy, control (flows to correct person)
• Upfront costs with setting up the trust

Answer 34

• Very flexible - different trusts to meet different needs
• Charitable trusts
• Grantor trusts - grantors may retain income for some period
• Marital trusts - to take best advantage of the different exclusions and transfers to spouses
• Minor trusts - until minor meets age of majority in their state
• If there are assets in the trusts, they do not need to go through probate process or need oversight of the courts

Question 35

Describe Will Substitute: Operation of Law

Answer 35

Another example of a will substitute is property that passes by operation of law.
* For example, assets owned jointly with rights of survivorship or tenants by the entirety are probate substitute assets.
* Legally, when one of the joint owners dies, his or her interest automatically transfers to the surviving owner, regardless of what the will directs.
* Other property passing by operation of law includes joint bank accounts, government savings bonds owned with a co-owner, dower & curtesy rights, and life estates.

The other will substitutes are assets in a payable-on-death (POD) account, such as a Totten trust, or assets in a transfer-on-death (TOD) brokerage account.

Additionally, a gift causa mortis, a general power of appointment, or property included in the decedent’s gross estate subject to the 3-year rule will not be subject to probate administration.

Question 36

AUDIO - Simply Stated: Will Substitute - Operation of Law

• Will substitute to allow owner to go around probate process
• Ownership titling
• 2 account titles that will flow - JTWROS and tentancy by th entirety
• Payment on death accounts
• Transfer on death accounts
• Life estates

Question 37

Describe Will Substitute: Contracts

Answer 37

Contracts payable to named beneficiaries pass outside of probate and are considered will substitutes.
* For example, retirement assets including pension plans and IRAs, annuity proceeds, nuptial agreements, buy/sell agreements, and deeds of title that pass a present interest all avoid probate.

Life insurance policies with named beneficiaries will not go through probate either, however, there are some exceptions.
* For instance, a life insurance policy that names the decedent’s estate as beneficiary will pass through probate.
* Also, if the owner of the policy is not the insured, at death the replacement cost of the policy will be included in the decedent/owner’s estate and will be subject to probate.

Question 38

AUDIO: Simply Stated: Will Substitute - Contracts

• Will Substitute - Contracts - to circumvent probate process
• Setting up the proper beneficiaries on life insurance, annuity contracts, IRA account
• Could be a revocable or irrevocable beneficiary
• Could be a primary or alternate beneficiary
• Assets will transfer automatically to named beneficiary
• Check on it regularly (quarterly or annually) - to make sure contracts in place have correct beneficiaries listed

Question 39

What are Reasons for Probate?

Answer 39

Conversely, there are several reasons why an estate should be probated.
* For example, reasonable settlement of beneficiary disputes,
* publicity for the decedent, particularly for significant charitable contributions, and
* most importantly, once probate has been closed, all future creditor claims against the estate will be denied.

Question 40

Describe Property Dispute

Answer 40

In cases involving real estate title disputes, the probate process can produce evidence of legal title or at least writings that enable an owner to defend the title to the real estate. This can be valuable to a client who wishes to prove his or her status as a legal titleholder.

In many jurisdictions, once the title has been resolved, the owner receives an executor’s deed that serves as proof of legal title.

Question 41

Describe Publicity

Answer 41

Probate provides publicity, which can be valuable in situations where the client wishes to have some degree of publicity surrounding the disposition of his or her assets, specifically for charitable purposes.

Question 42

What is Ancillary Probate?

Answer 42

Ancillary probate is a procedure that disposes of the real estate of the decedent that is located in a state other than that of the decedent’s residence.

A will or property distributed through intestacy can normally only dispose of the decedent’s personal property interests and those real property interests that are located in the state of the decedent’s residence.
* It cannot dispose of real estate located in a state other than that of the decedent’s residence unless the property is subjected to ancillary probate.

If a will attempts to dispose of real estate located in another state, the provisions of the will may direct to whom the real property will be transferred, but an ancillary probate procedure will be necessary.
* Therefore, the testator cannot avoid multiple probate proceedings, one in the state of the decedent’s residence and another in the state where the real property was located.

Question 43

How do you Avoid Ancillary Probate?

Answer 43

If a property owner wants to avoid an ancillary probate procedure for real property located in another state:
* The property will have to be gifted to another person during the owner’s lifetime,
* The property will have to be placed in a trust at some point during the decedent’s lifetime, or
* The owner can own the property jointly with rights of survivorship with the intended heir.

A will cannot avoid an ancillary probate procedure. Therefore, the owner of property located in a state other than the state of residence, should plan accordingly to dispose of the property to avoid the time delays and costs of an ancillary probate procedure.

Question 44

Section 2 - Avoiding the Probate Process Summary

Ancillary probate procedure disposes of the decedent’s real estate in a state other than that of the decedent’s residence. A will cannot dispose of real estate located in a state other than that of the decedent’s residence unless the property is subjected to ancillary probate procedure. Suppose a property owner wants to avoid an ancillary probate procedure for the real property located in another state. In that case, the property must be gifted to another person or placed in a trust at some point in the decedent’s lifetime.

Using trusts is another method of avoiding a probate process. Trusts have become extremely popular as estate planning techniques. They are excellent estate planning tools to help avoid probate because of the flexibility and convenience that can result from their proper implementation. Tax savings can also occur if a trust is implemented correctly.

Answer 44

In this lesson, we have covered the following:
* Reasons to avoid probate:
* The publicity associated with the probate of the estate,
* Time delays, and
* High costs.

Reasons for probate:
* Settlement of beneficiaries’ disputes judiciously in the probate court,
* Provision of legal titleholder to client to avoid property or title disputes, and
* Much wanted publicity to the client, particularly in the case of charitable dispositions of his or her assets.

Question 45

The greater the amount of property that is transferred inside the probate estate, the smaller the amount of administrative and legal expenses incurred by the estate.
* False
* True

Answer 45

False

• Costs involved in the probate of an estate are likely to be higher than if probate is avoided because most administrative and attorney’s fees are based on a percentage of the value of the probate estate. Additional costs also may be involved if the probate procedure includes appointments of guardians, conservators, or appraisers.
• Therefore, the greater the amount of property that is transferred outside the probate estate, the smaller the amount of administrative and legal expenses incurred by the estate.

Question 46

Robert resides in Texas but has some real estate in Florida. He wants to avoid the ancillary probate procedure while disposing of his real estate in Florida. What options does he have? (Select all that apply)
* Write provisions in his will that clearly states to whom the real estate should be transferred to after his death.
* Gift the real estate to another person.
* Place the real estate in a trust at some point in his lifetime.
* Write a provision in the will that attempts to dispose of the property during his lifetime in an attempt to avoid an ancillary probate procedure.

Answer 46

Gift the real estate to another person.
Place the real estate in a trust at some point in his lifetime.
* Robert has only two options — either to gift the real estate to another person, or to place it in a trust at some point in his lifetime to avoid ancillary probate procedure.
* He cannot choose the other two options because for a will to dispose of real estate located in a state other than that of Robert’s residence, the property has to be subjected to ancillary probate procedure. In his will, Robert can direct who should get the real estate in Florida, but an ancillary probate procedure will be necessary.
* A provision in the will that attempts to dispose of the property in an attempt to avoid an ancillary probate procedure is null and of no effect.

Question 47

Module Summary

The reasons to avoid probate are publicity associated with the probate of the estate, lengthy time delays and high costs. The advantages associated with probate are settlement of beneficiaries’ disputes judiciously in the probate court, provision of legal titleholder to client to avoid property or title disputes, and much wanted publicity to the client, particularly in case of charitable dispositions of his or her assets.

Ancillary probate procedure disposes of real estate of the decedent that is located in a state other than that of the decedent’s residence. If a property owner wants to avoid an ancillary probate procedure for the real property located in another state, the property will have to be gifted to another person, placed in a trust or owned jointly with rights of survivorship with another at some point in the decedent’s lifetime. Using trusts is another method of avoiding the probate process.

The key concepts to remember are:
* Proof of valid execution of a will is established if:
* The decedent intended the document to serve as his or her last will and testament or the decedent signed or acknowledged the document as his or her last will and testament,
* The decedent signed it in the presence of two or more disinterested witnesses, and
* The witnesses signed and acknowledged it in the presence of the maker of the will.

Answer 47

• Administration of the probate estate usually involves:
• An inventory of all probate assets,
• Payment of creditors’ claims, and
• Distribution of the probate estate according to the terms of the decedent’s will, or according to the laws of intestacy, if the decedent dies without a will.
• Ancillary probate procedure – disposes of real estate of the decedent that is located in a state other than that of the decedent’s residence. A will cannot dispose of real estate located in a state other than that of the decedent’s residence, unless the property is subjected to ancillary probate procedure.
• Avoiding an ancillary probate procedure - If a property owner wants to avoid an ancillary probate procedure for the real property located in another state:
• The property will have to be gifted to another person, or
• Placed in a trust at some point in the decedent’s lifetime.