Details for this article were excerpted from Evan H. Farr, CELA’s book, How to Protect Your Assets From Probate PLUS Lawsuits PLUS Nursing Home Expenses with the Living Trust Plus(TM). Buy the book THIS FRIDAY, JUNE 21 (the official release date) and receive $1,250 in bonuses. Read more about this special offer below the article.
Problems often arise when people don’t have a coordinated method of passing on their estate. Take for example, Joe, who has become incapacitated as the result of a severe stroke. He has a wife, Mary, and two children, Carrie and Phil. He does not have any incapacity planning documents in place.
James, on the other hand has died and had only a Last Will and Testament. His Will states that everything should be equally divided among his children, Patricia, Marie, and Brian. While he was alive, he created a joint account with only Marie. The three siblings were in disagreement about whether that account should be put back in the pool with the rest of the property or simply go to Marie, whose name was on the account.
What happens in both of these situations? In Joe’s case, without proper incapacity planning documents, his estate will go into living probate since he became incapacitated while he is alive. In James’ family’s situation, since he died without a trust and used a Last Will and Testament as his primary estate planning tool, his estate will go through post-mortem probate and a court will decide what happens with the joint account described. In both cases, the probate process could end up being a lengthy, costly and public process.
If you become incapacitated, like Joe in our example, while you are alive and you don’t have proper Incapacity Planning documents in place, then someone will have to go to court to have you declared incompetent. This person will seek to become your guardian/conservator.
Once officially appointed, a guardian/conservator under a living probate is accountable to the probate court and is required to:
- prepare and file various legal and financial documents,
- take an initial inventory of the estate and detailed annual accountings showing everything coming in to and going out of the estate
- ensure that all assets are accounted for and that any valid debts, expenses, and taxes are paid.
Living probate continues for the lifetime of the incapacitated individual.
To avoid living probate, you need to have Incapacity Planning documents in place. Incapacity Planning (which can be done by itself or in connection with your Estate Planning) involves the
signing of three important documents: (1) a Durable General Power of Attorney for legal and financial affairs; (2) an Advance Medical Directive, which includes a Medical Power of Attorney, Long-Term Care Directive, Living Will, and Post-Mortem Directive; and (3) a Lifestyle Care Plan. Taken together, these three important documents allow you to decide in advance who will manage your legal, personal, and financial affairs in the event of your disability, and exactly how you will be cared for.
To initiate the post-mortem probate process in most states, an Executor nominated in a Last Will and Testament must take the original Will and an original death certificate and make at least one appearance at the probate office to officially “qualify” and be “sworn in” as executor. If you died without a Will or Trust, then someone on your behalf goes to the probate office to become the Administrator of your Estate. Both an Executor of a Will and an Administrator of an Estate are called “Personal Representatives” and serve the exact same function.
Similar to the Conservator under a Living Probate, a Personal Representative under a post-mortem probate is accountable to the probate court and is required to prepare and file various legal and financial documents, including an initial Inventory of the estate, and provide detailed annual accountings showing everything coming in to and going out of the estate. The Personal Representative must see to it that all assets are accounted for and that any valid debts, expenses, and taxes are paid. With post-mortem probate, typically after a certain period of time from the date of death, the Personal Representative may distribute the remaining assets of the estate.
Using a Last Will & Testament (Will) as your primary estate planning tool means that your estate will go through probate upon your death. Because probate can be a time-consuming, expensive process, many people choose to avoid it. There are a number of legal strategies that will allow you to pass property to another person after death without going through probate. A properly drafted and funded trust will generally avoid probate. If you don’t have your estate planning documents in place, now is the time to get started. Please call The Fairfax Estate Planning Law Firm of Evan H. Farr, P.C. at 703-691-1888 to schedule a no-cost consultation.
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