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Probate Is Not So Bad!
We are constantly bombarded with questions about living trusts. Some of the claims frequently made are that a living trust avoids the need for probate, keeps your affairs private, and insures speedier distributions. We thought that we would take this chance not to defend probate but to promote it. Probate is the process where assets titled solely in decedent's name are administered in a predictable and timely fashion. Assets held in trust, in joint name, titled "in trust for" or subject to a contract with a beneficiary designation such as life insurance, are not involved in probate (unless the estate is named beneficiary). If there is a Will, the Will directs how the assets are to be distributed and who is to be the executor or executrix. If there is no Will, then Pennsylvania law determines who is to receive the assets and who has the right to administer the estate. Probate, with or without a Will, is a well-established process. Sometime after the funeral, a personal representative, whether an executor if there is a Will or an administrator if there isn't, is appointed. Notice is required to be given to all beneficiaries of the appointment and filing of any Will within three months. A certification of the notice must be filed. An Inventory of the estate assets and the Pennsylvania Inheritance Tax Return are required to be filed within nine months of the date of death. The notice and filing requirements encourage executors and administrators, with the assistance of legal counsel, to openly and timely carry out their duties. If the estate is not timely concluded, whether because of difficulty in marketing assets (such as a fractional interest in real estate), difficulties among heirs, or neglect of the executor or administrator, the Register of Wills, after two years has lapsed will send a rude reminder to file a report explaining why the estate is still open. If the reminder is ignored, the matter is referred to a judge. Similar reports must be filed annually thereafter if an estate requires protracted administration. Many estates today are settled and closed on a "fast track," where the administration moves smoothly and the beneficiaries are amicable. A Settlement (or Family) Agreement can be used to speed up final settlement and save the time and effort involved in the formal accounting of the personal representative and the audit and order of distribution by the Court. But in any event, probate provides for an orderly conclusion of the estate where judicial oversight is desired. Where, because of the number of heirs or lack of cooperation, an executor or administrator wants finality he or she may file an account (or financial history) with the court. Where the heirs want a formal review, they can insist on an accounting. A dissatisfied heir has a right to file objections to any account. If need be, a judge will resolve any disputes. Living trusts on the other hand are intended to remain private affairs and are designed to avoid court involvement. Living trusts do not have built in alarm clocks. If the trustee fails to file an Inheritance Tax Return, the Department of Revenue may not know to send out a reminder. The Department may become aware later, when payment of the tax with interest and penalties is now due directly from the beneficiaries. While at some point a judge might be asked to unravel a living trust, it may be at a much later time after the money is gone and the damage done, and at an additional cost to the heirs. Living trusts have their place, but are not for everyone. So please keep those living trust questions coming to Peacock Keller so we may assist you in determining what is best for your family situation. |
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