6 Common Probate Issues

When a family member passes away it can be a difficult time for those that he or she leaves behind. Not only must they cope with the physical loss of their loved one, but they must also undergo the emotional process of administering their estate. In instances where the decedent’s estate contains significant assets and complex family arrangements, unforeseen tensions and conflicts may arise among the beneficiaries. With proper estate planning in place before death, many familial issues can be proactively addressed.

An estate plan that incorporates a revocable trust and has assets correctly titled into the trust at the time of death, can avoid the probate process altogether and keep the administration out of the court system, saving beneficiaries time, legal fees and court costs. Without proper estate planning, if the decedent died with more than $75,000 of assets, the beneficiaries will be forced to conduct a formal probate administration, which in Florida requires the engagement of an attorney to supervise the process.

In a formal probate administration, the court will appoint a personal representative, aka executor, who will be authorized to do the following:

While family members have preference to serve as personal representative, sometimes it can be beneficial to have an independent professional serve as the personal representative. One example of an independent professional serving as personal representative would be for the attorney to serve. Having the attorney serve in the role of fiduciary can reduce tension between family members by providing communication about the probate process and ensuring all assets are accounted for and handled properly. An attorney will presumably not hold any bias towards particular family members and will maintain a professional demeanor throughout the process, with the sole priority of enforcing the provisions of the Last Will, or in the case there is no Last Will, to distribute the assets according to Florida intestacy statutes.

When a Last Will and Testament is created, a person should be identified to serve as executor of the estate. In Florida, the role of executor is referred to as personal representative. A personal representative or executor is essentially in charge of:

While most people who are nominated as a potential executor will carry out their role, some will not want to assume the responsibility. If the named executor opts out, the court will have to appoint another person to administer the estate throughout the probate proceedings, which has the potential to create considerable delay in the probate process. The easiest way to proactively mitigate this situation is for the testator to name additional persons that should serve as personal representative, if the first named person chooses not to do so. These subsequently named persons are referred to as contingent nominated personal representatives. It is advisable that a Last Will identify at least two, if not three, possible persons that may serve in the role as the personal representative.

Geographic borders will have a substantial impact on the way assets are distributed after the death of a loved one. If your loved one lived in one state, but also owned real estate in another, you will most likely have to conduct a probate administration in each state.

Real estate is always governed by the laws of the state in which it is located. Some states allow family members to conduct probate administrations without hiring an attorney, while others will require you to engage an attorney in order to open the estate, such as Florida.

A typical example would be a snowbird who travels between Florida and New York and owns real estate in both locations. In order to avoid state death taxes and income taxes, the snowbird is most likely to consider Florida to be his or her domicile and the death certificate will identify a Florida address as the last residence of the decedent. In such a situation the initial probate must be conducted in Florida, which will be considered the domiciliary probate. The Florida proceeding will control all tangible personal property owned by the decedent, such as bank accounts, brokerage accounts, jewelry, and vehicles. The Florida proceedings will also control any real estate located in Florida. If the decedent owned real estate in New York, then a separate probate proceeding must be conducted in that state in order to sell or transfer that piece of property on behalf of the estate. The New York proceeding will be known as the ancillary probate proceeding and it will be filed in the country in which the real estate is located.

Having to conduct multiple probate proceedings in different states can create considerable delays and complications, so having an experienced probate attorney assist with the administrations is always advisable. Fortunately, the Walser Law Firm has attorneys licensed in New York, New Jersey and Florida so our law office can assist with property located in all of these states simultaneously. When one law office is able to handle all of the administrations it will save the beneficiaries time and money.

If you have never experienced the probate process, you may be surprised at how tedious the marshalling and accounting of estate assets can be. In Florida, the personal representative is required to submit an inventory of assets to the court within 60 days of the estate being opened, which is the date the “Letters of Administration” are issued by the judge. Frequently the decedent will have passed away without a will or any other estate planning and the location and value of the assets held at death will not be known to the beneficiaries. In situations in which the assets are unknown, the personal representative will often have to do some investigation to track down clues as to where assets might be located, such as looking through the decedent’s mail and requesting tax returns from the IRS. The personal representative can submit a rough estimate of assets on the initial inventory filed with the probate court and can amend that inventory as more information is gathered from various financial institutions.

Generally, a personal representative is permitted to give their own estimate as to what they think any particular asset of the estate is worth. In more complicated estates where there are multiple beneficiaries, or tax consequences, it is advisable for the personal representative to obtain professional appraisals of all assets. The values will be reported on the inventory which is filed with the probate court and subsequently served on all beneficiaries.

Each beneficiary has the right to inquire as to how the value of any asset was determined and to request a copy of the appraisals. An independent appraisal is also a way to document any step up in tax basis that was experienced at the date of death. When a person sells an asset, such as a piece of real estate or share of stock, they will be responsible for reporting the sale on their tax return and paying a capital gains tax that may be associated with the transaction. The capital gain is calculated by finding the difference between what the asset was originally purchased for and what the asset eventually sold for. Capital gains are treated differently at death being that upon the death a loved one, any assets that were held in the name of the decedent are automatically reassigned a new tax basis according to the date of death value of the property. This process is referred to as a “step up in basis” and is utilized to avoid significant tax liability that would normally occur if the asset had been sold during the lifetime of the original owner. Since these capital gains taxes can represent significant savings, and in an effort to avoid questions from the IRS, an independent professional appraisal of the date of death values of the property is recommended.

What will be done with the real estate owned by a decedent is often a point of contention between family members. The easiest way to proactively handle this situation is for the Last Will & Testament to clarify what is to be done with the property.

Assuming the decedent passed away without a Will, the estate will be probated according to Florida intestacy statutes. Intestate beneficiaries will often disagree as to whether they should sell the property and distribute the cash evenly, rent out the property, or keep the property and let a family member live there. These issues will have serious ramifications on how the probate process will proceed, since the sale of real property will most likely require the services of a realtor as well as require orders from the probate court authorizing the sale to a potential purchaser.

In Florida, there is the additional complication of homestead status, which means the real estate is creditor protected and creates restrictions on how the property can be transferred. Homestead property must be handled properly with the probate court in order to successfully clear title.

Therefore, it is important that before entering probate, that the beneficiaries decide whether the real property will be kept or sold. Without an agreement as to how to handle the real estate, probate can be unnecessarily delayed. In cases of disagreement, it is often easiest to sell the real estate and split the proceeds among the beneficiaries.

Many families and individuals who are going through the probate process for the first time instinctively assume they can handle the court proceedings themselves. Although some probate attorney fees may be more than you are willing to pay, probate attorneys are experts in this area of law and understand all issues and concerns that may arise.

A common scenario is one in which the family starts the probate process on their own, mistakes are made with the pleadings submitted to the court and the judge refuses to sign the orders requiring the family to subsequently hire an attorney to fix the problem. Hiring an attorney from the start will lessen the time it takes to complete the probate process because the attorney will not be required

If you have questions regarding a loved one’s probate, it is important to seek the advice of an experienced probate attorney. The highly skilled Florida probate attorneys at the Walser Law Firm are happy to assist you with all your probate needs. Call our Florida office at (561) 750-1040 to schedule a consultation today, or fill out our contact form.

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