To ease lack of capacity and or post-mortem financial issues, you need to secure documents and prepare instructions before you become disabled or pass away. Here is a list to review annually at tax preparation time to ensure orderly financial transactions after disability or death. (more…)
As you are probably aware, laws and regulations relating to health care, long term care, Medicare and Medicaid are in a constant period of flux. The attorneys of Browning, Meyer & Ball are committed to lead the their clients and the legal community in understanding these laws and providing creative cost effective legal services while also navigating on our client’s behalf through what can sometimes be very rough seas.
Besides dealing with health care issues, what else is involved in elder law?
Our experience, expertise and understanding of elder law enables us to advise and provide for the needs of our clients in areas such as real estate, wills, trusts, disabilities, nursing homes, probate, asset preservation, taxes and long term care. This requires us to work closely with the family of our clients, social workers, psychologists, and other elder care providers to meet the needs of each individual. For the planning to be effective, it usually must cover all of these facets of elder law, and through effective planning we can enable an elderly family member to enter a nursing home when needed without exhausting the family’s assets and with the desire to minimize the natural stresses that are a part of our client’s season of life.
What is probate?
Probate is a legal proceeding to administer certain kinds of property (called probate property) owned by someone who has died (the decedent), and to see that claims, expenses and taxes are properly paid, and that the remaining estate is distributed to those entitled to receive it under the decedent’s will or Ohio law. Probate property is all property titled in the decedent’s name alone. It is distributed only under the decedent’s will or according to Ohio law. A probate proceeding takes place in the probate court of the county where the deceased property owned lived. If the deceased also owned real estate in another state, additional proceedings may be necessary in that state.
Why is probate necessary?
Probate is necessary to give the executor or administrator legal authority to deal with the decedent’s probate assets. The executor or administrator has the authority and duty to take control of and safeguard the assets of the decedent’s estate. Probate then provides a process for the payment of outstanding debts, taxes and the expenses of administration, and for the distribution of the remainder of the estate to the beneficiaries and heirs.
What does probate involve?
Probating an estate requires the appointment of a person to conduct the administration of the estate. If there is a will, this person usually is named in the will and is called an executor. If there is no will or no person is named in the will, this person is appointed by the probate court and is called an administrator. The executor or administrator may be an individual, a bank or a trust company.
The executor or administrator takes care of the following tasks:
- caring for all property of the decedent;
- receiving payments due the estate, including interest, dividends and other income;
- collecting debts, claims and notes due the decedent;
- determining the names, ages, addresses and degree of relationship of all heirs;
- determining the names, ages and addresses of all beneficiaries, if there is a will;
- investigating the validity of all claims against the estate and paying all outstanding obligations including federal, state and local estate and income taxes;
- planning for federal and state taxes and preparing and filing estate tax returns when required;
- carrying out the instructions of the probate court pertaining to the estate and distributing the assets of the estate to the heirs.
The probate court judge and support staff supervise the work of the executor or administrator. These actions may require the preparation and filing of numerous legal documents, the provision of notices, hearings in court, an appraisal of the assets of the estate, an inventory of the assets, completion of final income tax returns and possibly gift and estate tax returns, an accounting of funds, final transfer of all assets to beneficiaries, termination of the probate proceeding, and discharge of the executor or administrator by the probate court. Because of the complexity of these procedures, the assistance of an attorney usually is needed.
If the total value of all property in the decedent’s individual name is $35,000 or less, the estate can be relieved from some of these administrative requirements. Where the decedent’s spouse is entitled to receive all of the estate’s assets, the amount that can be relieved from formal administration is increased to $100,000.
How much does probate cost?
The costs assessed by the probate court are based on a schedule of charges established by law for each type of document filed in the court. Costs typically are about $200. Attorney fees charged for handling matters of the estate must, in most cases, be approved by the court and typically are based on a flat fee, percentage or hourly rate as agreed by the executor and beneficiaries. The executor or administrator is paid a fee set by Ohio law based on a percentage of the value of the estate assets administered.
How long does probate take?
A small estate that does not require the filing of an Ohio estate tax return and has no credit issues often can be settled within six months of the appointment of the executor or administrator. However, if an Ohio or a federal estate tax return is required, the administration of the estate can last more than a year. (Estate taxes are not due until nine months after the decedent’s death.) If there is an audit of an estate tax return, the administration can take an additional year or more, and an executor or administrator cannot safely distribute all of the estate assets until released from personal liability for estate taxes. An extraordinary administration involving a contested will or complicated tax litigation may take several years to complete. Claims against the estate may be made up to six months from the date of death. However, in many cases, distributions of most or all estate assets do not necessarily have to wait until all probate matters have been completed.
Who handles the estate?
When the person who died (the decedent) leaves a will, the probate court appoints the person named in the will to serve as executor of the estate. If the person’s will did not name anyone to be the executor, or the person(s) named in the will refuse or cannot act, then the probate court will appoint someone to act as the administrator of the will. The executor (or the administrator) works with the court to see that the decedent’s financial affairs are resolved and the remainder of his or her estate is distributed according to the instructions spelled out in the will.
When someone dies intestate, the probate court will appoint an administrator of the estate. Like the executor or administrator of the will, the appointed estate administrator will work with the court to see that the decedent’s financial affairs are resolved and the remainder of his or her estate is distributed according to law.
When appointing an administrator of the estate, Ohio law requires that the court appoint the surviving spouse of the decedent, and if none, or if the spouse declines, the court will appoint one of the next of kin of the decedent. In any event, the administrator must be an Ohio resident. If there is no surviving spouse or next of kin resident of the state, or if the court finds such persons to be unsuitable, some other suitable person will be appointed as administrator.
Before the court issues official letters of appointment naming an administrator, the appointed person must sign an acceptance statement that spells out his or her duties and acknowledges that the court can fine or remove an administrator for failure to perform those duties faithfully. The administrator must also post a bond (paid from the decedent’s estate) to cover potential losses that the estate might suffer through error or mishandling of assets during the administration process.
What does it mean when someone dies “intestate”?
Dying intestate simply means that a person died without a will spelling out how his or her property (called an estate) is to be distributed.
What are the duties of an administrator (executor)?
Remember, if a person dies with a will, the powers granted to the executor in the will empower the executor to perform tasks without the permission of the Court while an administrator must request permission of the Court to perform tasks such as to transfer tangible personal property (furniture), to transfer motor vehicles or to sell real estate. Some duties of an administrator are similar to those of the executor of a will.
The basic duties of an administrator and an executor are:
1. Inventory and appraisal. The administrator must identify and determine the fair market value of all financial assets and property that were owned by the decedent at the time of death.* The administrator must file an inventory listing all of the decedent’s probate assets and their date-of-death values with the probate court within three months of the administrator’s appointment, unless an extension is granted.
*(Important note: Most estates include what are known as non-probate assets, which generally do not have to be included in the inventory filed with the court. Non-probate assets are assets that legally pass from a decedent to a named beneficiary or to a co-owner at the time of death, without having to go through the probate court. Non-probate assets include: insurance policies, IRAs and pensions that are payable on death to a beneficiary; and a home, car or bank account that the decedent owned jointly with rights of survivorship. In many cases, the bulk of a decedent’s assets may be non-probate assets. The administrator must identify non-probate assets for tax purposes, but these assets are not otherwise included in the estate for which the administrator is responsible. When this pamphlet refers to collecting or distributing a decedent’s assets, it refers only to those assets that are subject to probate.)
If the value of an asset is “readily ascertainable” (for example, shares of stock in a publicly traded company or the balance in a bank account), then no professional appraisal is required; however, items such as jewelry, art objects, antiques, real estate and any other possessions whose value cannot be readily established must be appraised by a qualified person.
2. Collecting assets. The administrator must collect all assets of the decedent. This is very important (especially to prospective heirs) because it is these assets that will be distributed to the heirs after debts and taxes have been paid. Complications can arise in this process if assets legally owned by a decedent are in the possession of someone else at the time of death, or if property belonging to the decedent has been concealed or misappropriated by a third party. Sometimes collecting assets may require the administrator to follow through on a lawsuit in which the decedent was involved at the time of death, or to file a lawsuit to complete a legal claim the decedent had not fully asserted while alive. For example, if the deceased was killed in an accident it may be necessary to file a suit to recover damages for wrongful death.
3. Payment of debts and expenses. Creditors (people to whom the decedent, or his or her estate, owe money) have six months from the date of death to present their claims against the estate. In most cases, any claim not submitted within six months is barred forever. Claims must be in writing and sent directly to the administrator or mailed to the decedent’s address, and must be received by the administrator within six months. In addition to ordinary bills the decedent owed at the time of death, other debts typically include expenses to keep up property; local, state and federal taxes; hospital and funeral expenses; and expenses of administration including probate court costs, bond premiums and fees charged by appraisers, attorneys and the administrator.
Even after accepting a claim as valid, the administrator must be certain there will be sufficient assets to pay all claims, including those not yet presented. Certain debts have priority. Generally, costs and expenses of administering the estate, funeral expenses and taxes must be paid first. If there are sufficient cash assets in the estate to pay debts, they will be paid out of cash. If there is not enough cash, then estate property will be sold (personal property first and then real estate if necessary) to raise the cash needed. If the total assets in an estate are not sufficient to pay all of the valid debts, claimants must be paid according to a priority schedule established by law.
4. Distribution of assets. When all debts, taxes, costs and expenses of the estate have been paid, the administrator must distribute the balance of the estate to the decedent’s heirs according to a strict formula spelled out in Ohio’s statute of descent and distribution. Because an administrator may be held personally liable for an error or excess distribution to an heir that cannot later be recovered, legal advice should be obtained before making a final disposition of estate assets. Sometimes an administrator will make a partial distribution of certain assets before all claims have been received. In such cases, it may be prudent to advise persons receiving early partial distributions that they may be required to return money or property to the estate if it is needed to satisfy valid claims.
What is the statute of descent and distribution?
The statute of descent and distribution, also known as the intestacy statute, is the law that spells out how the probate assets in an intestate estate will be distributed to the decedent’s heirs after all claims, expenses and taxes have been paid. Generally, the statute favors those heirs most closely related to the decedent.
Following is a partial summary of some basic guidelines in Ohio’s statute of descent and distribution:
Please note that the following discussion uses lay person’s language and not precise legal terms or definitions, and does not include an exhaustive list of additional survivorship situations spelled out in the statute
- If a decedent is survived by a spouse and no surviving children or descendants of deceased children, the entire estate goes to the spouse.
- If a decedent is survived by a spouse and one or more children or their descendants, and all the children who survive or have lineal descendants are also the children of the surviving spouse, the entire estate goes to the surviving spouse.
- If a decedent is survived by a spouse and one child or the child’s descendants and the surviving spouse is not the natural or adoptive parent of the child, the spouse receives the first $20,000 from the estate plus one-half the remainder and the balance of the remainder passes to the child or the child’s descendants.
- If a decedent is survived by a spouse and more than one child or their descendants, the spouse will receive the first $60,000 if the spouse is the natural or adoptive parent of one, but not all of the children, or the first $20,000 if the spouse is not the natural or adoptive parent of any of the children. The spouse will receive one-third of the balance of the estate and the children will receive two-thirds of the balance of the estate. Descendants of a deceased child divide that child’s share.
- If there is no surviving spouse, but surviving children or their descendants, each of the children receives an equal share of the estate. Descendants of a deceased child divide that chlid’s share.
- If the decedent has no surviving spouse or children and no descendants of deceased children, the estate goes to his or her surviving parent(s) or, if both parents have died, in equal shares to brothers and sisters or their descendants.
What is an administrator’s (executor) account?
Within six months after his or her appointment, every administrator of an estate is required to file a report called a final and distributive account with the probate court. In certain circumstances, such as when an Ohio or federal estate tax return is due, an account is due 13 months after appointment and once a year thereafter. This account must include an itemized statement of all receipts, disbursements and distributions made by the administrator during the reporting period. When the administrator files the final and distributive account with the court, the administrator is released from his or her duties.
What are characteristics of an effective administrator (executor)?
One of the keys to being an effective administrator is to be highly organized. In the administration of a decedent’s estate, it is essential to keep complete, accurate records and to carry out all procedures required by the probate court in an orderly manner. Also, keeping a positive relationship with the heirs is helpful. This is especially true when the administrator is one of several surviving relatives of the decedent. An administrator is likely to encounter fewer problems and complications if he or she keeps all the decedent’s heirs informed of what is going on and treats them as equals.
Who should assist the administrator(executor)?
Serving as an administrator involves serious legal responsibilities, and can expose you to financial liability if claims and assets are not properly handled. If you are appointed to serve as administrator of an estate, do not rely on casual advice from friends and family members regarding your duties to the court and the decedent’s heirs. A lawyer can provide you with trained legal advice and professional judgment regarding the complicated laws involved, to help you avoid pitfalls and make the proper decisions.